Costa Coffee became the latest high street casualty today as sales cooled in its first quarter.
Its parent company Whitbread, which is preparing to demerge the coffee chain, said a 2 per cent fall in like-for-like sales was driven by tough trading conditions in UK shopping destinations.
This dragged down Whitbread’s overall same store performance, which came in 1.3 per cent lower than the same quarter last year.
Costa, which owner Whitbread plans to split off and list separately, has over 2,400 branches
Boss Alison Brittain said: ‘Both the budget hotel market and the coffee market present long-term structural growth opportunities, and, whilst we are cautious of shorter-term trading conditions in the UK, due to well-publicised consumer trends, we are confident that we have the right strategies in place to enhance our UK and international market positions and ensure each business is well-positioned to thrive as a separate entity.’
Total group sales, including its international division, rose 3.2 per cent.
Total sales at Costa rose 4.9 per cent, while revenue at sister firm Premier Inn jumped 2.2 per cent, driven by investment in new hotels.
Whitbread also owns Premier Inn, which will remain part of the group under the demerger plans
The coffee shop to hotels firm unveiled plans earlier this year to split off the Costa chain and list it as a separate entity, following pressure from activist investor Elliott.
The group said today it is making ‘good progress’ in preparing for the split.
It has since emerged, however, that Costa is being circled by a clutch of private equity firms, which opens the door to a potential £3bn sale of the high street chain.
Costa, which Whitbread acquired in 1995 from founders Sergio and Bruno Costa, has more than 2,400 outlets and is embarking on overseas expansion.
The coffee chain is the latest in a long line of high street occupants, including restaurants and retailers, to have been knocked by volatile UK consumer confidence and reduced visitor numbers.
Last week, upmarket restaurant chain Prescott & Conran collapsed into administration, and Poundworld hit the buffers earlier this month too.
‘Coffee-to-hotels company Whitbread is managing to keep its head above water despite various headwinds,’ noted Russ Mould, investment director at AJ Bell. ‘Weak first quarter like-for-like group sales isn’t deemed troubling enough for the board to change full year earnings guidance, which might explain why the share price went up after the announcement.’
‘Costa’s 2 per cent like-for-like sales decline would suggest its high street dominance is being seriously challenged by rising competition including small chains and independent craft coffee shops. But ultimately weak high street footfall is likely to have been the key contributor to lower sales,’ he added.