Whitbread reports 5.8% LfL growth in past 11 weeks: Whitbread has reported 5.8% like-for-like sales growth in 11 weeks to 12 February. Premier inn was up 8.6%, restaurants grew sales by 0.6% and Costa was up 6.9%. Chief executive Andy Harrison said: “We have continued our strong trading momentum in the final quarter, with total sales growth of 14.3% and like for like sales growth of 5.8%. Premier Inn and Costa continue to grow rapidly, winning UK market share, with Premier Inn also benefitting from the recovery in the UK regional hotel market. With this strong performance we expect to deliver full year results towards the top end of current expectations. In the final quarter Premier Inn grew its total sales by 16.5%, with like for like sales growth of 8.6%. Total revpar grew by 8.9% through an increase in occupancy of 3.0% pts to 71.1% and an increase in ARR of 4.3%. For the year to date we have combined record occupancy of 81.3%, up 3.3% pts on last year, with a 6.0% increase in rooms available. Our Restaurants grew total sales in the quarter by 1.6%, with good Christmas trading off-set by a softer January. Costa had an excellent fourth quarter with total sales growth of 19.8% and UK like for like sales growth of 6.9%. Our Christmas campaign was well received by customers, with like for like store transactions up 4.4% in the final quarter. We are investing to improve our customer propositions even further and in our ambitious organic network expansion. This year we shall open close to 4,500 new UK rooms and c.230 net new Costa stores worldwide, with a further c.5,500 new UK rooms and c.250 net new Costa stores worldwide planned for the next financial year. We expect our capital investment for this year to be c.£575 million, growing to c.£700 million next year as we open more hotel rooms and invest in our freehold pipeline, particularly in London. This organic network growth and our strong return on capital should continue to create substantial shareholder value.”

• For the 50 weeks Premier Inn continued to win market share and grew total sales by 15.2%, total revpar by 8.7% and the total number of rooms available by 6.0%. Total occupancy grew by 3.3% pts to 81.3% and total room nights sold increased by 10.4% to 15.8 million.

• During the quarter Premier Inn grew total sales by 16.5%, with a 6.9% increase in the total number of rooms available and like for like sales growth of 8.6%. Total revpar grew by 8.9%, ARR by 4.3% and total occupancy was 71.1%, up 3.0% pts on last year.

• In London we grew total sales by 23.9% in the quarter, with a 20.9% increase in the number of rooms available, whilst maintaining strong occupancy at 77.6% and total revpar growth of 2.6%. The London hotel market total revpar grew by 5.6% and the Midscale and Economy sector grew by 7.8%.

• In the UK regions we grew total sales by 14.6% in the quarter, with a 5.0% increase in the number of rooms available, combined with total revpar growth of 9.0% and occupancy rising 3.1% pts to 70.1%. The regional hotel market*3 total revpar grew by 10.0% and the Midscale and Economy sector grew by 12.3%.

• Our restaurants performed well in the quarter, against a tough comparative, with like for like sales growth of 0.6% and like for like covers down 0.4%.

• For the full year we expect to open close to 4,500 new UK rooms, including our first hub by Premier Inn, which opened earlier this year. In 2015/16 we expect to open a further c.5,500 new UK rooms. Our committed UK pipeline remains strong at 12,816 rooms.

• Costa continues to perform strongly, growing total system sales in the 50 weeks by 16.2% to £1,340.5 million, (17.5% at constant currency). Within this, franchise sales were up 15.5% to £516.9 million (17.9% at constant currency).

• UK Retail system sales grew by 17.2% to £730.3 million, with equity stores delivering like for like sales growth of 6.0% powered by like for like store transaction growth of 4.6%.

• Costa Enterprises (including Costa Express) grew system sales to £331.9 million, up 19.4%.

• International system sales grew by 10.9% to £281.2 million (16.4% at constant currency), with growth of 6.5% (13.0% at constant currency) in EMEI and 20.3% (23.5% at constant currency) in Costa Asia. 

• This year Costa will open around 230 net new stores, including c.180 in the UK and c.50 internationally, and add around 800 net Costa Express machines, taking the total to circa 4,300. Next year we plan to open c.250 net new Costa stores worldwide and install around 800 Costa Express machines.

Analyst – JD Wetherspoon risks are more than marginal: Morgan Stanley leisure analyst Vaughan Lewis has argued in a note this morning that risks at JD Wetherspoon are “more than marginal”. He dropped his price target for the company’s shares to 740p from the previous 800p because margin declines seem to be accelerating. He said: “Wetherspoon’s Ebit margin has dropped circa 50bps per year for the last 20 years. But margin declines seem to be accelerating (down 85bps in H1 2015) and with the margin now at 7%, the ability to absorb any disappointment in sales or costs is low. Sales growth is slowing, and the valuation is high. Margin pressure is nothing new, and is expected. However, margins reached an all-time low of 7.3% in H1 2015, and margin pressure is growing, as 50bps is a 7% Ebit drag at 7.3%, but only a 5% drag at the 10% Ebit margin just five years ago, even if the margin decline remains consistent. More concerning is that the rate of decline appears to be accelerating, with H1 2015 Ebit margins down 85bps. Like-for-like sales growth has been 5-6% for the last two years, but the average of the prior five years was just 1%, and sales growth has slowed recently. We think the market has become used to mid-single-digit growth, but with trends slowing and competition from High Street alternatives strong, we see risks to the downside. On an absolute basis, Ebitda per pub peaked in 2007 at £203k, and has since dropped 6% to £191k in 2014, with CROCCE falling since 2007. We expect debt/Ebitda to reach 3.2x this year, a new peak. Consensus forecasts have been falling for 18 months, with strong like-for-like growth being more than offset by margin declines. We see little scope for change here, with Ebit down in H1 2015, despite total sales growth of 9.1%. Our bear case assumes a 6.6% Ebit margin in F16 giving EPS of 46p, nearly 20% below consensus. Wetherspoon has an enviable long-term sales and expansion record, and we see it as a long-term industry winner. If shares drop significantly, or management demonstrates an ability to manage a flat or rising Ebit margin, we would become more positive on the investment case.”