Whitbread has released a trading update today as activist investor Sachem Head requests consideration of a Costa break-up
Companies: Whitbread PLC
Whitbread (LON: WTB) has announced its Q3 18 results today which show flat growth across both its Costa Coffee and Premier Inn hotel brands, blaming a tough UK market for the halt.
Costa saw UK like-for-like sales decline by 0.1% due to a decrease in High St footfall whilst Premier Inn's UK operations saw a modest 0.5% uplift in like-for-like Revenues. Management blamed a weak London hotels market.
Overall, however, reported Revenues across the Group worldwide were up 5.6% while the stock was up almost 3% to 3959p at the time of writing on Thursday.
Group CEO Allison Brittain said Costa was feeling the heat from the decrease in footfall being felt across the UK retail market:
"The well-publicised weak retail market footfall is negatively impacting our high street stores' like-for-like performance and we expect this to continue for some time."
At Premier Inn, she noted:
"Our performance in the quarter moderated as the budget hotel market weakened and we had a particularly challenging October."
On top of the tough conditions across the High Street, increased inflation will "continue to pose challenges in the year ahead" its CEO also commented.
Reuters has also reported overnight that activist investor Sachem Head, who has a 3.4% stake in Whitbread valued at over £7bn, has called for a breakup of the GRoup. The idea of a split is seen by its investor as well as many others as a way to boost the value of both Costa and Premier Inn.
The Reuters article pointed out that Activist investors often buy stakes in companies to push them to consider break-ups...
"Unlike more aggressive activists like Elliott, Sachem Head only occasionally pushes for change at the companies where it invests. One of its most notable activist campaigns to date has been at U.S. design software maker Autodesk...
Analysts at Barclays said in a note dated Jan. 3 that the “most ‘obvious’ step” for Whitbread would be to sell Costa, should its boss Brittain, who took the helm in December 2015, decide to restructure the company."