Costa reports slowing sales

03 March, 2016

The high street coffee shop chain’s owner, Whitbread, has blamed mild weather for disappointing sales.

Sales growth slowed considerably in the group’s final quarter, due to a combination of an “unusually warm winter” this year, and a reduced number of shoppers using the high street.

Whitbread reported like-for-like (LFL) sales growth of just 0.5% at Costa Coffee in the 11 weeks to 11 February.

This meant LFL sales growth across the Whitbread group, which also owns restaurants that are often attached to its Premier Inn hotels, rose by just 1.7% in the final quarter, compared to 3.5% growth in the previous three months.

At Costa, the group expects to open 200 new stores worldwide and install 950 Costa Express machines. It is also trialling Costa Collect, a pay-and-collect app to reduce queues and boost sales, along with improved food ranges.

Analysts at Morgan Stanley recently toured a Costa Fresco trial site in central London, where the kitchen prepares freshly baked products. Currently, Costa mainly sells pastries, other sweet treats and centrally produced panini, and is missing out on the trend towards more freshly made and healthier food.

Most analysts had been expecting a fourth-quarter LFL sales growth increase of 3% at Costa. But some had talked about the prospect of weaker sales at the coffee chain in the final quarter, as they said shoppers were wary about spending time on high streets, in the wake of the terrorist attacks in Paris last November.

Whitbread’s new chief executive Alison Brittain said in the statement that it was “another good trading period” for the group, and full-year pre-tax profits were likely to be in line with expectations.

She said: “Costa had good total sales growth of 10.5% and like-for-like sales growth of 0.5%, reflecting lower footfall on the high street and an unusually warm winter.”

Brittain admitted in December that the group had “work to do”, as its third-quarter results also fell short of expectations. The shares have lost more than 9% since then, and more than 25% since last April.

In January, Costa became the first UK coffee shop chain to launch a vegan product registered with The Vegan Society’s Vegan Trademark.

The full year results for Costa Coffee and Whitbread will be published on 26 April. 





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