Whitbread confident on FY despite flat first quarter

18th Jun 2024 07:19

(Sharecast News) - Premier Inn owner Whitbread said it was confident on its full year outlook despite flat first quarter sales.

Hotel sales were boosted by a strong performance in Germany, where they rose 15%, offsetting zero growth in the UK. Group sales, which include food and beverages, rose 1% to £739m for the three months to May 30, compared with the same period last year.

Revenue per available room (RevPAR), a key industry metric, fell 2%.

"While midweek business demand and peak leisure demand remained robust, weekend demand at short-lead was slightly softer, particularly in London, reflecting a return to more normalised levels after what was a very strong performance last year," the company said on Tuesday.

UK food and beverage sales were 1% behind last year, with strong breakfast sales driven by high occupancy in hotels offset by softer trading in a number of Whitbread's branded restaurants, which include the Beefeater and Brewers Fayre brands.

"Whilst the normal booking pattern means our forward visibility remains limited, our forward booked position is positive and we remain confident in the full year outlook. This reflects a more encouraging trading performance in the UK, our strong commercial programme and increased cost efficiencies, as well as good progress in Germany," said chief executive Dominic Paul.

He added that Whitbread was on track with the programme restructure in the food and beverage business announced earlier this year, which would see around 1,500 jobs axed and the closure of more than 200 restaurants. The plan is also designed to add more than 3,500 hotel rooms across its estate and increase "operational efficiencies".

Interactive Investor head of markets Richard Hunter said heightened borrowing costs and pressure on disposable customer incomes were still "real headwinds, both in the UK and Germany".

"In addition, while the shares are now 44% higher than when Covid first hit, they remain down by 29% to the level just prior to the pandemic. In addition, some of the competitors in the sector benefit from geographical diversification, whereas Whitbread's footprint is more confined."

"More recently, question marks on the consumer capacity to spend have been overhanging the sector as a whole, and Whitbread is no exception. Over the last year, the shares have fallen by 16%, as compared to a gain of 6.5% for the wider FTSE100, with most of that weakness coming over the last six months."

"Even so, the market consensus of the shares as a buy is also an indication that investors have bought into a story which could have much further to run, especially if growth in Germany comes through as is hoped."

Reporting by Frank Prenesti for Sharecast.com