April 25, 2017 / 6:54 AM / in 3 years

Britain's Costa Coffee-owner Whitbread sees tougher times ahead

(Reuters) - Whitbread Plc (WTB.L), which runs British brands such as Costa Coffee and Premier Inn hotels, warned on Tuesday of the impact of a tougher consumer environment, sending its shares seven percent lower.

A Cappuccino stands on a table at a branch of Costa coffee in Manchester northern England, March 18, 2016. REUTERS/Phil Noble

Rising inflation and muted wage growth following Britain’s vote to leave the European Union last June is forcing many consumers to rein in their spending.

“Indications suggest that there is going to be some constraint on (the) pound in the average consumer pocket with inflation and higher petrol prices and a relatively static wage position,” Chief Executive Alison Brittain told reporters.

Brittain said some changes to spending patterns had already started to feed through, although adding that the company was confident of meeting overall expectations in the current financial year.

Whitbread shares traded 7.25 percent lower at 39.95 pounds by 0930 GMT.

Like for like sales at Premier Inn, a budget hotel brand, rose 2.3 percent in the year to March 2, while Costa sales rose 2 percent on the same basis.

“The company is growing sales but at a slower pace than in the past as it struggles to fight off consumer trends at its two key businesses – hotels and coffee,” said Neil Wilson, senior market analyst at ETX Capital said.

Whitbread is facing increasing competition from Airbnb and the growing popularity of smaller independent coffee outlets.

“The market and competitive landscape continue to evolve with more food-led operators now offering coffee and... customers are becoming more demanding in the way their priorities are met,” the company said in a statement.

Whitbread said full-year underlying pretax profit rose 6.2 percent to 565 million pounds, broadly in line with expectations.

Reporting by Rahul B and Tenzin Pema in Bengaluru; editing by Keith Weir

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