What's going on?

Whitbread, the owner of British companies such as Costa Coffee and Premier Inn, saw its shares fall 7% on Tuesday after it reported slowing sales growth.

What does this mean?

Whitbread�s earnings did not appear to be that bad: overall revenue grew 8% versus a year ago, in line with the company�s forecast. It also raised its dividend, which means investors will get a larger cash payout than last year. But its sales growth slowed versus the previous year and revenue per room at Premier Inn (an important performance measure for hotels) declined. Perhaps most worryingly for investors, Whitbread warned that slowing consumer spending in Britain could hurt its sales later this year.

Why should I care?

For the stock: Whitbread is expected to keep spending money on expansion.

While Whitbread has announced some cost cutting initiatives in recent months, it is expected to push ahead with a costly expansion of its hotel and coffee businesses, especially outside of Britain. This may prove to be an astute long-term strategy, but with the company�s sales and profit growth slowing, it also appears to be making investors nervous. A more defensive response to falling sales growth is usually to decrease overall costs.


The bigger picture: It�s getting tougher for companies that sell things to British consumers.

Apart from hotel rooms, Whitbread mainly sells things like flat whites and restaurant meals � largely to British consumers. With prices in Britain rising at their fastest pace in five years (partly due to the big Brexit-related selloff of the pound), people are finding themselves with less money left over in their pockets each month. Naturally, that puts pressure on sales of coffee and restaurant meals as well as clothing, electronics and pretty much anything else that Brits typically buy. It looks like this is, unsurprisingly, having an impact on the companies that sell these things.