Last updated: December 11, 2012 7:40 pm

China slowdown fails to dent Costa

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Slower growth in China failed to dent overall gains at Costa, as the coffee chain helped buoy third-quarter revenues at Whitbread.

The FTSE 100 company said like-for-like sales growth from its 200 stores in China – a big focus for coffee makers’ expansion – fell from 19 per cent in the first half, but was still “comfortably in double digits” during the 13 weeks to the end of November.

Costa on Tuesday reported a 7.1 per cent increase in overall like-for-like sales boosted by caffeine-hungry Christmas shoppers and, some analysts suggested, the woes of its US-based rival Starbucks.

“It is difficult to define the impact of [the Starbucks tax issues] into the figures, but we remain the UK taxman’s favourite coffee shop ... Starbucks has taken a bit of a knock,” said Andy Harrison, Whitbread chief executive.

Seattle-based Starbucks’ 760-strong portfolio of UK stores has become a lightning rod for criticism since Reuters revealed in October that the coffee shop chain had paid no UK corporation tax in the past three years.

Last week, Starbucks bowed to public pressure and pledged to pay £10m in UK corporate tax in each of the next two years.

In its most recent financial year, Whitbread paid £84.4m of UK corporation tax, with Costa’s share some £18m of that.

“Costa’s performance is likely to have received a boost from the negative publicity around Starbucks’ tax affairs, although it has consistently reported this level of like-for-like sales growth over the past 18 months,” said Simon French, analyst at Panmure Gordon.

At Whitbread’s Premier Inn business, it’s biggest division by revenues, like-for-like sales rose 2.5 per cent as budget-conscious travellers continued to opt for the group’s midpriced hotel rooms.

However, a 0.7 per cent increase in revenue per room – a key industry sales measure known as revpar – was less than half the 1.5 per cent expected by analysts and down from 1.9 per cent in the first half. That was led by a revpar decline of 0.9 per cent in London, as the local hotel market settled in the aftermath of the Olympic Games.

The company said it would build 4,500 new rooms during the full year in a bid to boost capacity from 50,000 rooms to 65,000 by 2016, and increase national market share from 6 to 10 per cent.

The group’s restaurant unit, which operates the Beefeater and Brewers Fayre chains, reported sales up 1.9 per cent compared with last year, but again slower than the 3.4 per cent growth reported in the first half.

Whitbread shares rose by 60p, or 2.5 per cent, to close at £24.88 on Tuesday.

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