Whitbread shares retreat as Premier Inn growth disappoints

(Reuters) - Whitbread Plc WTB.L, Britain's biggest hotel and coffee shop operator, reported a sharp slowdown in revenue growth at its Premier Inn business, helping knock its shares which had risen sharply through the past month.

A cup of espresso is pictured on a table at a branch of Costa Coffee near Manchester, Britain May 5, 2017. REUTERS/Phil Noble

The Premier Inn chain was expected to benefit in Whitbread’s home market from record levels of foreigners visiting Britain due to the weakness of the pound following last year’s Brexit vote, as well as “staycationers”, or British people taking holidays at home.

However, growth in UK revenue per available room, or RevPAR, a key measure in the hotel sector, shrank to 1.8 percent for the six months ended Aug. 31 from 3.1 percent in the first quarter.

Analyst at Liberum wrote that the RevPAR increase could be disappointing as investors had expected more trickle-down benefits from inbound tourists and stay-at-home domestic consumers.

Whitbread also reiterated its caution on the economy overall, having in April sent its shares sharply lower by warning of the impact of a tougher consumer environment marked by rising inflation and muted wage growth.

The stock, which had risen earlier this month to a four-month high, was down 5 percent at 3,742p by 0914 GMT, having hit its lowest in four weeks. Whitbread shares were the top fallers in a flat blue chip FTSE 100 .FTSE index by a handsome distance.

Whitbread’s underlying pretax profit rose 6.7 percent to 328 million pounds in the six months to Aug. 31, on revenue up 7.4 percent to 1.67 billion pounds. The half-year dividend was raised 5 percent to 31.4 pence.


Growth was aided by the opening of more than 2,000 new Premier Inn rooms and 108 net new Costa stores in UK and the company said it was on track to have 85,000 rooms by 2020, up from 70,120 at the end of the half year.

Costa’s UK revenue rose 8.3 percent to 542 million pounds, driven by a good response to its breakfast and lunch ranges and the addition of a net 108 new outlets.

The FTSE 100 company is fighting on several fronts as it seeks to expand internationally amid a dip in consumer confidence in its largest market, Britain.

Higher inflation and depressed wage growth are forcing many consumers to rein in their spending and Whitbread’s hotel business faces rising competition from online services such as Airbnb.

At its Costa coffee stores, Whitbread is introducing new blends and adding more food options as it tries to fend off competition in a crowded sector in the UK.

The group also sees Britain entering a “third wave” in coffee consumption, in which consumer preferences become more sophisticated and there is growing willingness to spend more per cup for higher quality.

Reporting by Rahul B in Bengaluru; Editing by John Stonestreet and David Holmes