INTERVIEW: Whitbread's Costa Unit Enjoying Very Good 2010

14th Jun 2010 14:52

By Michael Carolan Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Whitbread PLC's (WTB.LN) Costa Coffee chain has yet to see any impact from the U.K.'s consumer downturn, enjoying a very good 2010 so far, the division's managing director said Monday. But he warned that the U.K.'s recovery would be far more painful than the recession had been. "This year has been very good," Costa's managing director John Derkach told Dow Jones Newswires Monday. "We've not seen any sign at all of the recession." "The impact of the recession was relatively mild," said Derkach at the sidelines of a restaurant conference in London, "we've had a pretty good recession." But consumer spending is likely to suffer far more in the years ahead, he added. "The recovery will be more painful than the recession," he said, "there will be several years of painful recovery." While interest rates and inflation stayed low in the U.K. throughout the recession, measures to repay government debt are likely to result in higher unemployment as well as higher taxes, he said. Costa should prove resilient however, he said, as customers continue to trade down and have coffee meetings rather than lunch meetings. Derkach said he was unconcerned about a possible hike in U.K. sales tax at next week's budget. "It won't be a nightmare for us," he said, "though it will probably prohibit price increases for a while." In the year to March 4, Costa Coffee's revenue grew 23% with profit up 60%. Costa Coffee operates 1,700 outlets throughout the U.K. and 24 other countries. Much of last year's sales increase came from new stores though Derkach admitted it should have been more. "Last year we slowed down our expansion," he said, "we possibly slowed down more than we should have." He expects to open around 100 Costa Coffee outlets in the U.K. this year, with around 30 more expected to open internationally. Whitbread bought 89 Coffeeheaven stores late last year and Derkach said there could be opportunities for similar deals in the years ahead. Whitbread, which also operates the Premier Inn budget hotel chain, reports its first-quarter trading on June 22. -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; [email protected] (END) Dow Jones Newswires June 14, 2010 09:52 ET (13:52 GMT)