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Thu 28th Apr 2022 - Update: Whitbread reports strong current trading momentum, but pub restaurants experience slower recovery
Whitbread reports strong current trading momentum, pub restaurants seen slower recovery: Whitbread has this morning reported “sustained outperformance in UK with strong current trading momentum”. The Premier Inn owner reported a “strong recovery from last year” – with total UK accommodation sales in the 53-week period to 3 March 2022 198.0% ahead of FY21 with total UK food and beverage sales 170.2% ahead. In H2, total UK accommodation sales were 12.5% ahead (7.9% ahead on a 52-week basis) of pre-covid levels, and like-for-like 7.5% ahead (3.2% ahead on a 52-week basis, despite the impact of the Omicron covid variant in Q4. It said that total UK food and beverage sales were 30.9% behind FY20 (32.7% behind on a 52-week basis), again due to lockdown closures, recovering in H2 to 9.7% behind (13.3% behind on a 52-week basis). Revenue for the year stood at £1.7bn (2021: £589.4m), while adjusted pre-tax loss was £15.8m (2021: £194.9m). The company said: “Premier Inn UK’s hotel trading in the seven weeks to 21 April 2022 remains well ahead of the market; total accommodation sales were 326.6% ahead of the same period last year and 29.9% ahead of FY20 (pre-covid), representing a 28.3 percentage point outperformance of the midscale and economy market. The group’s network planning exercise has identified an acceleration in the exit of independent operators from the UK market, providing further opportunity for Premier Inn to take market share. The group expects to add c.1,500 – 2,000 rooms in the UK and c.2,000 – 2,500 rooms in Germany in FY23. The value pub and restaurant sector in which we operate remains behind pre-covid levels. Premier Inn UK food and beverage sales improved to be well ahead of FY22 and 4.6% behind FY20 levels in the seven weeks to 21 April 2022. Total UK food and beverage sales were 163.4% ahead of FY21, but 32.7% behind FY20 reflecting the fact that all restaurants were closed from the start of the year until 12 April, when outdoor service only was permitted in England. The estate was largely reopened on 17 May, with total food and beverage sales improving to 13.3% behind FY20 levels in the second half of the year, as the pub and restaurant value-sector sees a slower return to pre-covid levels. On a 52-week basis, total food and beverage sales were 163.4% ahead of FY21 and down 32.7% compared to FY20 (H1 down 51.2%, H2 down 13.3%) with the vast majority of the estate only reopening on 17 May. The overall value pub and restaurant sector’s recovery has been slower than other restaurant sectors, and greater impacted in Q4 by the impact of the Omicron variant. New menus, enhanced drinks offering, and improved digital marketing will help drive an improvement in Premier Inn food and beverage sales into FY23. In the current trading period, the company said that total UK sales were 498.0% ahead of the same period in FY22, and 17.3% ahead of FY20. Total accommodation sales were 326.6% ahead of FY22 and 29.9% ahead of FY20, with occupancy at 81.0%, despite the increase in VAT on hospitality products and services from 12.5% to 20% on 1 April 2022. Total UK accommodation sales were 28.3pp ahead of the market.” It said: “Trading during the Easter holiday period was robust with strong domestic leisure demand and increasing levels of inbound international demand. Business demand continues to improve, and our booked position into summer, albeit still a relatively small proportion of total sales for the period, is encouraging. The value pub and restaurant sector in which we operate remains behind pre-covid levels. Premier Inn UK food and beverage sales improved to be well ahead of FY22 and 4.6% behind FY20 levels in the seven weeks to 21 April 2022.” Whitbread said that as we move through the year in the UK, it expects international inbound demand to increase, alongside recovering office-based corporate demand, “complimenting the already high levels of leisure and business trade demand”. It said: “We have good visibility throughout Q1 and somewhat into Q2, but the short booking lead-time nature of our business means we have less visibility into the second half of the year. In our restaurants, we anticipate that the rollout of new menus, combined with targeted marketing initiatives, will help drive an improvement in food and beverage sales as we move through the year. Sector cost inflation in FY23 is anticipated to be above historic average levels at c.8-9%, about 1% higher than previously guided due to the impact of the Ukraine conflict on utility and food costs. We expect to be able to offset some of these higher levels of inflation through our extended cost efficiency programmes, estate growth and pricing power.” Alison Brittain, Whitbread chief executive, said: “Whitbread’s performance in the year was strong, with revenues and profits recovering exceptionally well from last year. Our hotels traded well-ahead of the market in the UK driven by our ‘investing to win’ commercial initiatives and the strong appeal of our customer offer. As restrictions eased after the first quarter, high levels of leisure demand and improving business demand helped drive UK accommodation sales ahead of pre-covid levels throughout the summer and into autumn, with sales remaining resilient through Q4 despite the emergence of the Omicron covid variant. As we move into the next phase of our covid recovery, this excellent performance, combined with confidence in the group’s outlook, means that the board is now proposing the reinstatement of dividend payments. Whilst our hotel performance was excellent, the value pub and restaurant sector in which we operate has seen a slower recovery post reopening in May 2021. We are seeing an improvement in our UK restaurants performance, and we are confident the commercial initiatives we have recently launched will help drive a further improvement in sales. As we move into the next phase of our post-covid recovery, Whitbread is well-placed to enhance our market leadership position further in the UK, to accelerate our growth in Germany, and drive long-term value for all our stakeholders.”

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Retail sales slump as consumers cut back on spending: Shoppers cut back on spending this month as fears over rising inflation and energy prices continue to squeeze consumers. The Times reports CBI’s monthly measure of retail sales fell to a 13-month low in April after big drops in March following the outbreak of the war in Ukraine. The measure of retail sales fell one point to -24, far below economist expectations of -5. The survey, of 108 companies including 51 retailers, is the latest data to show a pronounced slowdown in consumer spending after last year’s strong recovery on the back of the easing of covid-19 restrictions. Consumers are facing 30-year high inflation driven by food and energy prices, which economists predict will get worse before it gets better later this year. “Rapid inflation means that the cost-of-living crisis is going nowhere soon,” Martin Sartorius, lead economist at the CBI, said. “Retail sales were below seasonal norms in April as consumer spending continued to shift back towards services and rising prices impacted households’ spending power.” Businesses are also suffering from further supply chain disruptions caused by the war in Ukraine and the recovery from the pandemic. The CBI’s survey showed suppliers registered their first monthly fall in orders for more than a year. Retailers said they were suffering from low stock levels in April. The Office for Budget Responsibility has warned that Britons are facing the worst cost of living crisis since the end of the Second World War, with real incomes due to drop 2.2% this year as a result of higher inflation and rising taxes. One factor that could prop up spending despite record inflation is if households draw on the savings they have accumulated during the pandemic, Gabriella Dickens, UK economist at Pantheon Macroeconomics, said. However, she warned that a looming slowdown in growth and falling consumer confidence meant most households “will act with caution when deciding how much to draw upon their savings”. Dickens added: “Evidence also suggests that consumers are more likely to put these excess savings towards a house deposit or their pension pots.”

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