By Rahul B
(Reuters) - Britain's Whitbread Plc (L:WTB) said sales growth slowed and margins declined at its Costa Coffee chain, overshadowing a better-than-expected first-half profit and sending the hotel operator's shares lower in morning trading.
The stock fell as much as 4 percent to 3689 pence on the London Stock Exchange, making it one of the biggest losers on the blue-chip FTSE 100 index (FTSE).
Whitbread's Costa Coffee is facing tough competition as customers move to independent coffee shops offering newer blends.
Like-for-like sales growth at its Costa Coffee business slowed to 2 percent in the 13 weeks to Sept. 1, from 2.6 percent it reported in June, while margins fell 1.8 percentage points from a year earlier.
The sluggish growth comes after Whitbread said in June that Costa Coffee had recovered from a poor performance earlier in the year. The coffee chain accounted for 36.6 percent of the company's first half revenue.
"The slowdown in Costa LFL and declining margin (although due to phasing) could dampen the response to the results," brokerage Davy analysts said in a note.
Former banker Alison Brittain, who took over as Whitbread's chief executive in September last year, faces a tough task of keeping costs tight and expanding overseas, as Whitbread's hotel business also battles rising competition from online holiday rental startups such as Airbnb.
The company said underlying pretax profit rose to 307 million pounds in the six months to Sept. 1, from 291.3 million pounds a year earlier, ahead of a 303 million pound forecast in a company-compiled consensus.
