Tax row perks up Costa coffee sales

Costa CoffeeThe owner of coffee chain Costa has revealed a surge in sales as rivals Starbucks and Caffe Nero were criticised for their tax arrangements.

Costa, which has 1,212 UK stores, saw like-for-like sales rise 7.1% in the 13 weeks to November 29, compared with 6.8% in the first half of the year, parent firm Whitbread said.

The strong performance came as it emerged that Starbucks paid just £8.6 million in corporation tax in 14 years of trading in Britain and nothing in the last three years.

While Starbucks has since changed its tax arrangement so it will pay around £10 million in corporation tax this year, the revelations sparked a customer boycott and protests, and analysts have suggested that Costa could benefit from the bad publicity. Meanwhile, Caffe Nero reportedly paid no corporation tax last year despite making profits of almost £40 million.

It was reported that Costa paid £15 million in corporation tax on £377 million sales last year, compared with Starbucks' £398 million in sales, on which it paid no corporation tax.

Elsewhere, Whitbread said Premier Inn, which has benefited from an ad campaign featuring comedian Lenny Henry, saw like-for-like sales rise 2.5% in the period.

Shares in Whitbread were up 3% after the latest update. Costa saw total system sales in the 39 weeks to November 29 rise by 21.9% to £733.9 million, within which franchise sales were up 18.7% to £295.7 million. Its UK retail store sales grew by 20.1% to £399.2 million in the period.

Whitbread plans to open 330 net new stores worldwide and around 1,300 Costa Express self-serve coffee bars in the full year.

Whitbread said Premier Inn increased total room nights sold by 9.6% to 10.5 million and in the year to date its revenue per available room grew by 1.8%. Its restaurants division, which includes the Beefeater Grill chain, saw sales growth of 6.8% in the year to date - or 4.3% on a like-for-like basis.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "The company continues to benefit from being well positioned in a cost-conscious consumer environment, and this momentum has filtered through to both the underlying numbers and, indeed, the share price."

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