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Costa posts strong quarterly sales but urges caution on UK trading conditions

Whitbread says group is “on track” to deliver full-year expectations as Costa Coffee posts total first quarter UK sales growth of 5.2% – but like-for-like sales fall and automated sites show strongest growth

Total sales growth for Costa’s global operations stood at 3.2% and Whitbread said the coffee chain’s like-for-like sales in China were “growing.” However, UK like-for-likes, fell 2% as Whitbread Chief Executive, Allison Brittain, acknowledged “well-publicised consumer trends” had created challenging trading conditions on the high street.

Brittain attributed the slump to “footfall weakness in traditional shopping locations” but said travel locations continued to show “good growth.”

UK high street trading conditions have toughened in the past 12 months as lower footfall causes major retail and F&B brands, such as Marks & Spencer, Jamie’s Italian and Byron to close sites. Some, such as Maplin and Toys R Us, have closed altogether. Coffee shops have, however, shown resilience to the downturn and continue to add stores according to Allegra research.

Despite increasingly difficult trading conditions on the UK high street, Brittain remained upbeat about Costa’s capability to continue innovating the coffee shop market. She also reaffirmed Whitbread’s commitment to demerge the Costa and Premier brands, although further details will not become available until October 2018.

“Both the budget hotel market and the coffee market present long-term structural growth opportunities… 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,” she said.

Whitbread also hailed 9.6% sales growth across is its automated Costa Express sites across the UK. The popularity of the machines, of which Costa operates 8,237 globally, demonstrated strong consumer demand for convenience-driven offerings, the group said.

In response to the convenience trend, Whitbread said Costa would continue to “actively rebalance” to high footfall and convenience locations. In April 2018, Costa completed an upgrade of point-of-sale terminals, which allowed it to roll-out a lunch-time meal deal across the UK and mobile ordering trial across 16 London stores.

In China, a key market for Costa Coffee Whitbread said it was on track to open around 100 new stores this year. The chain currently operates 459 stores in the burgeoning coffee shop market, some way behind Starbucks’ 3,300.

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