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What next for Whitbread shares following the sale of Costa Coffee?

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There was one very specific reason why Whitbread shares bucked the wider FTSE 100 decline in 2018. The £3.9 billion sale of Costa Coffee to Coca-Cola, a deal announced at the end of August and completed in early January, ensured that it ended the year far higher than where it began, the stock climbing 14.6% to close out December at £46.01.

Since 2019 began, Whitbread shares have rallied rather sharply, briefly hitting £50 for the first time in nearly 3 and a half years before pulling back to a current trading price of £49.36.

Now that Costa has gone, the pressure is on Premier Inn to perform. Though October’s interim results saw the brand post a 3.1% rise in hotels to 795 and a 5.6% increase in rooms to 74,070, Occupancy actually fell 170 basis points to 80.1%.

More worryingly, revenue per available room, arguably the most important metric when looking at Premier Inn, slipped 0.9% year-on-year to £52.97. Like-for-like accommodation sales growth, meanwhile, was just 0.2% against the 4.0% seen for the same period the year previous.

On top of that, Whitbread warned the combination of its ‘commitment to the investment programme and the current UK consumer environment’ means its near-term profit growth ‘may be lower than in previous years’.

In terms of Thursday’s Q3 update, investors will be keen to see that Premier Inn’s like-for-like sales and revenue per available room started to recover across the quarter. Any word on the brand’s German expansion will be welcome, ditto its new budget hotel chain Zip.

Whitbread shares have a consensus rating of ‘Buy’ alongside an average target price pf £47.89.

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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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This article does not constitute investment advice. Do your own research or consult a professional advisor.

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