Whitbread warns of consumer slowdown

CONSUMERS are reining in their spending, leisure group Whitbread warned today after unveiling a 17.8% rise in pre-tax profits. The company said customers at several of its operations appeared to be spending less and being more careful with their money.

Whitbread, whose businesses take in the Premier Travel Inns chain, Marriot UK hotels, the David Lloyd Leisure health and fitness clubs, TGI Friday's, Costa Coffee and the Brewers Fayre and Beefeater pub restaurants, said like-for-like sales had slowed during the year to March 3.

Margins could come under pressure following the increase in the national minimum wage, increased utility charges and business rates, though Whitbread said it would limit the impact of these extra costs through improved operational effectiveness.

There was more bad news at David Lloyd Leisure, where total UK membership fell 2.3%, reflecting the fact that the leisure clubs market is nearing saturation. The company admitted that intense competition and weaker consumer confidence had seen members failing to renew their subscriptions and a slowing rate of new member sales. LA Fitness, Whitbread's key quoted rival in the sector, last week admitted that it too had been hit by a slowdown in consumer spending.

Pre-tax profits after exceptional items last year climbed to £249.4m from £211.7m, broadly in line with expectations. Chief executive Alan Parker said that the company's restructuring, which is almost complete, will see the company make a 'significant' return of cash to shareholders. Investors get a 13.2% rise in the full-year dividend to 25.25p.

Whitbread said in March that it would give up control of its Marriott UK hotels business in a £1.3bn deal that will leave it to concentrate on developing its budget Premier Travel Inns chain. The company will also use the money raised to plug the deficit in its pension fund, it said today.

In a separate announcement, Whitbread today unveiled the disposal of its German steakhouse chain Maredo for £24.2m to a private equity consortium. Whitbread bought Maredo in 1994 but said last October that it saw the operation as a non-core business.