What consumer slowdown? asked Jeremy Warner in The Independent, as British leisure group Whitbread (LON:WTB)revealed a like-for-like 7% revenue gain for the 13 weeks to 29 May. “Even in boom times, this would be impressive.” The core businesses – Premier Inn hotels, Costa coffee shops, Brewers Fayre and Beefeater – are all doing well.
Behind the numbers
But the good figures don’t mean consumers in general are bearing up. Whitbread is doing well because consumers are trading down to cheaper restaurants and hotels as “the credit crunch starts to hit their wallets”, as Catherine Boyle said in The Times. Whitbread’s key brand, Premier Inn, which accounts for 70% of profits, is “well positioned to benefit from a structural shift to the budget hotels sector and trading down through a more difficult consumer environment”, said Investec Securities analyst Matthew Gerard.
But life will get harder. The group “remains almost entirely dependent on discretionary spending in the UK”, as Lex noted in the FT. British hotels usually follow US trends within a year, and across the Atlantic room rates are sliding. And Starbucks’ US sales decline “is ominous for Costa”. The divergence between the hitherto resilient leisure sector and the ailing high street “cannot persist”.
Elsewhere, too, signs of trouble abound. Sainsbury said first-quarter annual same-store sales growth slowed to 3.4%, excluding petrol. “Sainsbury is having to chase sales harder than most of its peers” by offering more discounts, said Merrill Lynch analyst John Kershaw. And last week mobile-phone group Carphone Warehouse was downbeat on broadband revenue growth for this year. According to CFO Roger Taylor, “there’s a recessionary feel” in the economy.