Costa Coffee loses its froth as sales fall

Britain’s biggest coffee shop chain, Costa Coffee, has suffered a fall in sales at its high street stores and warned consumer demand would remain “subdued”.

Costa’s owner, Whitbread, said like-for-like sales at its UK high street outlets had fallen 1.5% in the 13 weeks to 30 November. Costa Express machines, which are mainly in petrol stations, convenience stores, offices and airports, fared better, with 6.7% sales growth.

The chief executive, Alison Brittain, said: “Performance declined in traditional high street stores reflecting weakening footfall, with trading on the high street expected to remain subdued in the near term.”

Excluding new stores, Costa’s overall UK sales dipped 0.1% in the quarter, marking only the second time they have ever fallen. The first decline was in the quarter to February last year, when they fell by 0.8%.

Neil Wilson, senior market analyst at the financial spreadbetting firm ETX Capital, said: “The drop in Costa sales seems to be down to shoppers shunning the high street, resulting in lower footfall for stores, as well as pressure from the artisan coffee retailers who are gaining market share.

“At present it does not appear that higher-margin finer coffee products as well as the newly launched Cold Brew and Frostino lines are helping to improve sales and margins.”

Costa has 1,357 high street stores, 1,032 franchise stores and 7,100 Express machines in the UK.

The company has joined Wagamama, JD Wetherspoon and All Bar One in ditching plastic straws. The decision follows Theresa May’s pledge to eliminate all avoidable plastic waste within 25 years.

Whitbread’s budget hotel chain Premier Inn posted slower UK like-for-like sales growth of 0.5% after a tough October. It explained it had sold rooms cheaply in advance, rather than filling them later at a higher price.

Wilson said Premier Inn was probably under pressure from the rise of Airbnb and similar ventures, adding: “Given the weakness in sterling and increase in UK tourist spending, Premier Inn arguably should be doing better.”

Whitbread is rolling out Premier Inn in Germany, where it faces less competition in the branded hotel sector.

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