Whitbread’s adoption of National Living Wage to hit Costa coffee prices

Whitbread PLC, the owner of the UK hotel chain Premier Inn and Costa coffee shops, announced on Tuesday that it is developing plans to adopt the governments national living wage policy, however it will mitigate the cost of this scheme by a combination of productivity improvements, and selective price increases.

Chancellor George Osborne announced in his July Budget speech that the national living wage would increase by GBPo.70p per hour to GBP7.20 an hour from next April for workers over 25. The national living wage is expected to rise to at least GBP9.00 per hour by 2020.

In the year ended 26 February 2015, Whitbread reported a 13.7% increase in group revenue to GBP2,608.1m and underlying profit before tax of GBP488.1m, an increase of 18.5%. The company, which also owns restaurant brands, Beefeater, Brewers Fayre, Table Table and Taybarns, employs over 45,000 people in over 2,200 outlets across the UK, serving more than 25 million UK customers every month.

The company said that it continues to deliver its “ambitious organic growth plans” and its total sales increased by 11.1% in the 11 weeks to 13 August. Like for like sales also increased by 3.3% in the last quarter. 

Whitbread will reportedly open 5,500 UK rooms; 220 net new Costa stores worldwide; and install 700 to 800 new Costa Express machines this year.

According to the BBC, recruitment company Manpower has carried out a survey of  2,101 employers, which found that UK jobs market was at its least optimistic level for three years. The company warned that the living wage was prompting employers to cut back on hiring and said the living wage was sending “shockwaves” through the UK labour market.

James Hick, of Manpower, was quoted as saying: “some employers may seek to reduce the extra costs by taking on more younger or self-employed workers, who were not entitled to the living wage.”

Coffee chain Costa boosts Q3 sales at Whitbread

UK hotel and restaurant group Whitbread plc (LSE:WTB) announced today an increase of 3.3% in like-for-like sales for the third quarter of 2012, boosted by strong performance at its coffee chain Costa, which is expanding its operations.

Sales at Costa outlets open more than a year grew by 7.1% in the 13 weeks to the end of November, with total sales up 25.5%. Whitbread said that it plans to open 330 net new Costa stores worldwide and around 1,300 Costa Express units over the full year.

The group, which also operates hotels and restaurants across the UK, said that its total like-for-like sales increased in all areas of the business during the third quarter. Overall, growth was slower than the 4.3% rise in underlying sales seen in the first half but the first six months of the financial year benefited from Britain’s wet weather and the London Olympic Games, Reuters reported.

In the Premier Inn budget hotel business like-for-like sales were up 2.5% in the third quarter and the company announced that it has opened its 50,000th room in the UK.

The restaurant arm outperformed the market with sales growth of 1.9%, according to the company. This rise was predominantly driven by an increase in spend per head. Whitbread’s restaurant brands include Beefeater, Brewers Fayre, Table Table and Taybarns.

Whitbread chief executive Andy Harrison commented that the economic environment remains challenging but said that the company is on track to deliver full-year results in line with expectations.

Shares in Whitbread were up 4.7% in early deals, the Telegraph reported.

Under its five-year growth plan through to 2015-16 Whitbread is aiming to increase the number of Premier Inn UK rooms to at least 65,000, to add 80-100 new restaurants and to nearly double the size of the Costa business, with global system sales of GBP1.3bn and 3,500 stores worldwide.