Sales at Costa Coffee dented as consumers 'stop frittering money away'

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Sales at Costa Coffee have been dented by Britain's high street woes, its owner Whitbread has said.

Comparable sales at Costa fell by 2% in the UK in the first quarter of 2018, dragging down group like-for-like figures at Whitbread, which came in 1.3% lower.

The retail sector has been hit hard by rising costs and falling consumer confidence, resulting in several high profile casualties and store closures this year.

Emma-Lou Montgomery, at Fidelity Personal Investing, said: "Another day, another warning about a lack of consumer spending.

"Now it seems that Brits have woken up and smelt the coffee. All those tips on how to stop frittering money away have hit home - and hit Whitbread's bottom line."

Whitbread shares opened flat in morning trade on the London Stock Exchange.

Total sales at Whitbread, including international, rose 3.2%, and 4.9% at Costa.

Revenue at Whitbread's hotels chain, Premier Inn, was up 2.2% over the quarter.

Boss Alison Brittain said: "Both the budget hotel market and the coffee market present long-term structural growth opportunities, and, whilst we are cautious of shorter-term trading conditions in the UK, due to well-publicised consumer trends, we are confident that we have the right strategies in place to enhance our UK and international market positions and ensure each business is well-positioned to thrive as a separate entity."

The coffee shop to hotels firm said earlier this year that it will split the Costa chain and list it as a separate entity, following pressure from activist investor Elliott.

"Constructive early steps have been taken in preparation for the demerger and good progress continues to be made on the core infrastructure and efficiency work that was already under way," Whitbread added.

But it has since emerged that Costa is being circled by a clutch of private equity firms, opening the door to a potential £3 billion sale of the high street chain.

Costa, which Whitbread acquired in 1995 from founders Sergio and Bruno Costa, has more than 2,400 outlets and is embarking on overseas expansion.

Under the de-merger plan, Premier Inn would stay with the group.