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So far Whitbread shares have held onto the growth they managed in the first week of the year, when boosted by the sooner-than-expected completion of the sale of Costa Coffee to Coca-Cola, a rise that lifted it from £45.50 to around £48.50.

It did climb a bit higher in mid-March, eventually crossing £50, only for a ratings cut by Morgan Stanley to drag it back to a current trading price of £47.85.

January’s third quarter results weren’t particularly well-received, despite Whitbread announcing a £500 million share buyback. That’s because the situation at Premier Inn – effectively the company’s sole focus in a post-Costa world – is hardly a confidence-builder.

While total UK accommodation sales were up 3.5% in Q3 and 4.4% for the year-to-date, like-for-likes were down 0.2% and up just 0.1$ respectively. The situation was even worse at its Food & Beverage brands – that includes Brewers Fayre and Beefeater – with year-to-date comparable sales sliding 0.7%. This meant that total like-for-likes fell 0.6% in the third quarter and 0.7% for the 39-week period ending 29th November 2018.

On top of this, Whitbread claimed that, due to a UK environment that ‘remains subdued’ and the ‘significant challenge’ of sustained inflation, it expects its underlying pre-tax profit for its financial 2020 to be ‘consistent’ with its 2019 performance. This as it highlighted ‘weaker’ UK market revenue per available room, greater investment, German losses of around £12 million, ‘short-term operation dis-synergies’ post-Costa sales, and cost savings £20-30 million lower than its forecast cost increases.

As for Tuesday’s full year results, analysts are expecting underlying pre-tax profit to drop 19% to £477 million, with revenue at £2.09 billion.

Whitbread shares have a consensus rating of ‘Hold’ alongside an average target price of £51.02.

This article is brought to you in association with Spreadex. All opinions expressed in this article are from the author and do not necessarily represent the opinions of The Armchair Trader. You can find out more about Spreadex products and services here, or find more articles from Connor Campbell here.

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Connor Campbell

Connor joined Spreadex in 2014 as part of a newly expanded financial analyst team after graduating from the University of Southampton with an MA in English. His focus is on providing Spreadex's customers with up-to-date and informative news, and is responsible for the market analysis found on the Spreadex website.

Connor produces three daily market updates, a daily stock earnings preview, a weekly financial market preview piece every Friday, a round-up of all the big financial stories making the weekend press every Monday morning and regular stock market features.

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