Like-for-like sales at Costa Coffee were up 0.1% in its third quarter to 30 November, with a 1.5% fall across its UK equity stores.
Taking into account its Express business, Costa grew total revenue by 7.2% in the quarter and is now 7.9% up in the year-to-date. Like-for-like sales are up 1% year-to-date and down 0.1% in UK equity stores.
Parent company Whitbread said growth had been driven by expansion in drive-thru, retail park and travel locations and the growing demand Costa Express.
The group said it had seen weakening footfall at its traditional high street stores and expected this market to be subdued in the near term. However, work is underway to improve the overall customer proposition, with new coffee product development, enhancements to the food offering and improvements in digital capabilities. Whitbread said there had been a “good increase in the proportion of customers buying food with their coffee”. In addition, the new Costa Club loyalty app was launched in November 2017, which now has 1.2 million active users.
Premier Inn saw total sales growth in the third quarter of 5% (YTD: 6%), including like-for-like sales growth of 0.5%.
The Restaurants division saw like-for-like sales grow 1.8% in the quarter and 1.3% in the year-to-date.
Chief executive Alison Brittain said: “We have made good progress in executing our strategy and have grown group sales so far this year by 6.8%. This growth, combined with the results from our group-wide efficiency programme, means that we are on track to achieve expectations for the full year.
“Premier Inn UK achieved total hotel sales growth of 5.5% in the quarter as we continued to deliver our strategy to win market share through investment in new hotels and extensions, which will mature to give strong returns over the next few years. Our performance in the quarter moderated as the budget hotel market weakened and we had a particularly challenging October. Although it is early in the fourth quarter, performance so far has been encouraging and reflects a return to year-to-date performance.
“Costa UK has delivered strong total sales growth of 7.2% in the quarter, as we pursue our strategy to increase our presence in high footfall and convenient locations such as drive-thru and travel locations and we are particularly pleased with the strong performance of Costa Express. As a result of our channel strategy, more customers are drinking more cups of our coffee than ever before and we have gained market share. We have also continued to invest in the overall customer proposition, including new coffee, food and digital capability. These improvements have been well received by our customers and we have just been voted as the nation’s favourite coffee shop, for the eighth consecutive year.
“Our Costa high street stores in the UK are highly profitable and generate strong returns. However, the well-publicised weak retail market footfall is negatively impacting our high street stores’ like-for-like performance and we expect this to continue for some time. Internationally, Costa in China continues its good momentum with another quarter of positive like-for-like sales growth.
“We remain committed to delivering our strategy to invest in the attractive structural growth opportunities in the budget hotel market and the growing coffee markets, in both the UK and internationally. We do expect the tough UK high street environment and inflation in our sector to continue to pose challenges in the year ahead. However, we have good momentum in the delivery of our plan to enhance our UK market leadership positions, create an international business of scale in Germany, China and Costa Express, and develop a more efficient infrastructure. This will create further customer loyalty and deliver long-term growth in earnings and dividends and a strong return on capital.”
