Costa Coffee: sales grew 17.9 percent in FY 2014

Dunstable / UK. (wbp) Costa Coffee, Europe´s largest coffee shop chain and part of British Whitbread PLC, delivered another outstanding performance during the year, with total sales growth of 17.9 percent driven by strong UK Retail and Enterprises sales growth, with the opening of 219 net new stores worldwide and 777 net new Costa Express machines. Underlying operating profit increased by 20.7 percent to 132.5 million GBP. The strong trading performance increased return on capital by 5.8 percent points to 46.3 – the Group said in its statement for the financial year to 26 February 2015: «In April 2011 and 2013, we laid out our growth milestones to grow system sales to approximately 1.3 billion GBP and approximately 2.0 billion GBP in 2016 and 2018 respectively. In 2014/2015, we achieved our 2016 milestone a year early, with total system sales of 1.4 billion GBP driven by a strong UK performance. We are making good progress towards our 2018 milestone as Costa continues to win market share in the UK coffee shop market and we are developing exciting opportunities in our international markets. We see continuing profitable growth beyond 2018 and have published a new milestone for 2020 to grow system sales to approximately 2.5 billion GBP».

UK Retail

Costa is the UK´s favourite coffee shop and has delivered another excellent performance, with total UK retail sales growing by 16.2 percent and like for like sales in UK equity stores increasing by 6.0 percent, mainly as a result of a 4.6 percent growth in transactions per store. Our strong organic growth is continuing, extending our lead in the UK, with the opening of 176 net new stores in the year, taking the total to 1’931. According to Allegra Strategies, the coffee market analysts, UK branded coffee shop chains are expected to grow at around five percent per annum to 2020. Assisted by this growth we are aiming to grow our UK store base to around 2’500 in 2020. Product innovation underpins our like for like growth and we are pleased with the success of our new range of coffee blends, Old Paradise Limited Roasts, as well as enhancements to our food offering. The success of our breakfast trial and the launch of our new sweet range continue to drive improvements in trading. Investment in our stores is also a key element of our strategy with 117 equity stores refurbished in 2014/2015. 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. The coffee shop brand preference survey (as conducted by YouGov) rates Costa as the clear number one.

Costa Enterprises

Costa Enterprises had a very successful year, growing system sales by 20.1 percent. Costa Express delivered a strong performance with the installation of 777 net new units, giving a total of 4’292 units at year end with 338 overseas. We have an ambition to double the business by 2020, as we continue to expand into new growth channels in the UK as well as focus on our international expansion. Our wholesale business also continues to make good progress.

Costa EMEI

Costa EMEI had a good year, with total system sales growing by 8.1 percent (a growth of 14.7 percent at constant currency). Our franchise business performed well, with a strong performance in the Middle East and Ireland. In our equity business in Poland, the re-branding plan is making good progress, with 53 percent of our estate re-branded from Coffeeheaven to Costa, and the business is delivering like for like sales growth. The re-branding will be completed in 2015/2016. In France we now have 11 equity stores and three franchise stores and expect to open up to half a dozen stores during the current financial year.

Costa Asia

China, where we operate through two joint ventures, remains an exciting opportunity. During the year, 43 new stores were opened, focusing on tier one cities, and net of closures this took our total number of stores to 344. We also made progress on the profitability of our like for like estate in China. We are continuing to invest in new store openings, as well as building critical infrastructure, stronger management capabilities and a network for profitable growth. We believe we can grow our Chinese store base to around 900 in 2020. Outside of China we have 20 franchise stores in South East Asia.

About

The complete news release «Strong growth in revenue, profit and dividend – New growth milestones for 2020 – Whitbread PLC results for the financial year to 26 February 2015» is available on Whitbread´s web server.