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Whitbread fuels speculation of Costa sell-off after activist pressure

Bradley Gerrard
Total sales rose at Costa but a like-for-like dip could add weight to calls by activist investor Sachem Head for a sale of the coffee chain

The boss of Whitbread today fuelled speculation the company could spin off Costa coffee chain under pressure from a US activist fund.

Alongside stagnant results, Whitbread’s chief executive Alison Brittain responded ambiguously to overnight calls by Sachem Head to spin off the business.

She said: “We remain entirely open-minded about the structure of the business and are fully committed to reviewing it on a regular basis at the board level.” The comments were interpreted as a sign Whitbread could consider a break-up following a series of shareholder meetings next month.

New chairman Adam Crozier is expected to take soundings from the City amid investor frustration over Whitbread’s recent lack of progress. The former ITV and Royal Mail chief executive is rated as a turnaround specialist.

While she did not rule out a split, Ms Brittain resisted pressure to make immediate moves. She defended the company’s own effort to reignite Costa as a growth machine as having made “good progress” and reaffirmed the company’s commitment to the chain.

Chief executive Alison Brittain has batted away suggestions a break-up makes sense part way through its transformation programme

She said: “If you think of our transformation plan like being in the middle of renovating your house and part way through adding an extension, at that point in time the house is probably not as valuable as when the work is ­complete.”

She declined to comment on the company’s contact with Sachem Head, which bought a 3.4pc stake in Whitbread last month.

Ms Brittain claimed Whitbread’s plans to open more Costa outlets in airports and train stations, along with its expansion in China, will spur new growth. American-style drive-through coffee outlets are also on the menu.

The company sought to blame its weak growth in the third quarter on a tough high street climate and squeeze on consumer spending, with Ms Brittain citing “well-publicised weak retail footfall”.

The number of shoppers on UK high streets fell 3.5pc in December, compared with 2016, according to figures released by the British Retail Consortium and Springboard earlier this week.

Whitbread’s like-for-like sales were up just 0.3pc. The figure included a 0.1pc decline at Costa, outweighed by a 0.5pc revenue increase at the hotel chain Premier Inn.

Elsewhere, the company’s restaurant business, which includes chains such as Beefeater, performed strongly with like-for-like sales in the quarter up 1.8pc.

Neil Wilson, analyst at ETX Capital, said the results were the “same old story at Whitbread”.

The shares closed up 3.5pc on hopes Sachem Head’s intervention will trigger faster change.