Costa eyes 250 new stores as it nears £1bn in sales

Costa Heathrow

Whitbread will seek to build on the continued growth of its coffee shop chain Costa by opening 250 new stores this year, many of them in the UK.

In what will mark a major opportunity for its key suppliers, the hospitality giant revealed this week that it is estimating cash capital expenditure for 2014/15 at around £100m as it prepares to fund 250 new coffee shops and install between 700 and 800 Costa Express machines.

In the UK, Costa has opened 176 new stores during the past year, taking its total estate to 1,931 outlets.

Store investment remains a “key element” of the brand’s strategy, with 117 equity stores refurbished over the past year.

“The investment in organic growth, innovation, our teams and our stores has enabled us to increase our share of the UK coffee shop market and to build market-leading customer preference for our brand,” said chief executive Andy Harrison.

Costa’s cash capital expenditure totalled £82m last year, with £56m on expansionary capital as it opened 370 new coffee shops worldwide and installed almost 800 new Costa Express machines.

Product improvement and maintenance expenditure increased £4m to £25.9m, with a significant chunk of that figure spent on upgrading 117 Costa stores.

Costa achieved sales growth of 18% last year, taking its total to £952m. That was led by UK like-for-like growth of 6%, 219 net new stores worldwide and 777 net new Costa Express machines. Underlying operating profit increased 21% to £132m.

Whitbread claims it is “continuing to win share” in the UK coffee shop market and will look to augment that by targeting growth opportunities in international markets.

The company also revealed this week that its Restaurants division had enjoyed a “good year” with total sales growth of 3% and like-for-like sales up 2% despite only opening four new restaurants over the past 12 months. Underlying operating profit rose by 15% to £401m as sales hit £543m.

The company said that its Restaurants business had made “good progress” in the year, although it conceded that the final three months of the year had been difficult.

“While the first three quarters of the year showed a food performance, there was a slowdown in the market in the fourth quarter,” said Harrison. “We continue to focus on improving our menus, procurement and promotions using data from our loyalty cards to drive top-line performance,”

Whitbread said it had also made good progress rejuvenating its brands, with the Brewers Fayre brand refresh now complete and 38 Beefeaters converted to the new format.

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