Jamie Rollo at Morgan Stanley looks ahead to the Q4 update from Whitbread, which is due on 26 February and said he expects solid like-for-like sales, up 2%, aided by struggling competitors, better hotel trading, continued sales initiatives, and slightly weaker comps. He believes the group’s Costa business will have benefited from the poor publicity at rival Starbucks.
He said: “UK RevPAR was solid in December, both Premier Inn and Costa should have benefitted from weakness at their competitors, Whitbread continues to implement yield enhancing initiatives in hotels and pubs, and comps are slightly weaker. LfL sales of +2% would be a slowdown from the 3.3% growth in Q3 (and H1’s +4.3%, which benefitted from the Olympics and other one-offs) reflecting the continuing weak consumer environment, and the poor weather in January.
“This would imply +3.5% LfL growth for the FY vs. our current estimate of +2.8%. Every 1% is around £10m to EBIT which implies c.£7m upside to our and consensus £379m EBIT forecast. However, Whitbread did caution at its Q3 results that preopening and marketing costs would be higher in H2, and was happy with consensus forecasts.”
Rollo forecasts a +3% Q4 LfL sales growth at Costa, a slowdown from the +7% in the first 9 months.
He said: “We think it should have benefitted from the poor publicity at Starbucks related to its tax payments. Starbucks rolled out a TV campaign in the middle of January and started offering £1.50 tall lattes on Mondays so it could have regained some share. However, Costa could have still taken a chunky share from Starbucks.
“Every 1% to FY LfLs is c. £3m to EBIT. Costa lowered its expansion target from 350 to 330 and it had opened a net 234 shops at the results after a high number of closures (52) in EMEI. Our forecasts assume 350 net openings.”
Rollo forecasts +1% Q4 LfL sales across the group’s restaurants.
He said: “This is a slowdown from the 2.9% growth in the first 9 months as it runs into tougher comps. The cold weather in January could also be a headwind, although most operators have reported solid growth during the festive season. The Coffer Peach tracker, which tracks LfL sales at pub restaurants, showed a 2.1% improvement in December. MAB reported a strong 4% improvement in the 6 weeks to 5 January, but a 6.5% drop in the following 3 weeks as trading suffered from the snow. Every 1% to FY EBIT is c. £3m to EBIT.”
