Premier Inn owner Whitbread is another casualty of continued market uncertainty

Like for like sales fell and occupancy levels declined, but the longer term prospects remain relatively bright

Article updated: 16 January 2020 12:00pm Author: Joe Healey

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  • Weak business confidence as a result of continued uncertainty has lagged results with total UK like-for-like sales falling 1.3% in the quarter and occupancy levels declining by 1.8%
  • Structural industry inflation and lingering uncertainty will also be weighing on investor sentiment which explains why shares have reacted poorly this morning
  • Nevertheless, the group remain confident in achieving full year expectations for FY20
  • Looking longer term, prospects remain relatively bright with attempts to diversify away from its main UK market running smoothly
  • Shares dropped more than 5% in early trading as market react to latest results
  • Recommendation: We currently view the shares as a ‘Hold’, with market uncertainty likely to weigh on the sector in the near-term

Despite a stronger post-election environment Whitbread, the owner of Premier Inn delivered relatively lacklustre results again this morning with UK total sales growth growing 0.3% in the three months to November. Weak business confidence as a result of continued uncertainty has lagged results with total UK like for like sales falling 1.3% in the quarter and occupancy levels declining by 1.8%. Nevertheless, the group remain confident in achieving full year expectations for FY20.

External factors are currently against Whitbread with Brexit continuing to cast a dark cloud. Net margin headwinds stemming from a higher National Living wage and higher utility costs are also weighing on the groups outlook. Structural industry inflation and lingering uncertainty will also be weighing on investor sentiment which explains why shares have reacted poorly this morning. However, from a longer term perspective, prospects remain relatively bright. Attempts to diversify away from its main UK market seem to be running smoothly with good progress in Germany and 2,000 more rooms are expected this year.

All in all, Whitbread’s navigation of current short-term uncertainty is crucial. Despite this, a strong balance sheet, resilient business model and ongoing business investment paves the way for a fairly optimistic outlook. If international expansion continues on a positive trajectory and business confidence returns, there is no reason for investors not to be quietly optimistic.

We currently view the shares as a ‘Hold’, with market uncertainty likely to weigh on the sector in the near-term. But for investors willing to look past this and willing to accept medium-higher risk, the long-term strategy seems fitting and provides the company with potential for growth moving forward.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Joe Healey

Investment Research Analyst

Following his completion of the graduate scheme, Joe is an Investment Research Analyst covering equities. He holds a BA Hons Business Management degree and is currently studying towards CFA Level II after passing CFA Level I in June 2019.

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