Whitbread shares jump but protests planned over Premier Inn job cuts. Should you invest?

Whitbread – the hotel and pub company - says trading has improved, particularly in Germany, but is now a good time to buy?

Operations At A Whitbread Plc Hotel And Restaurant Ahead Of Quarterly Results
(Image credit: Bloomberg / Contributor)

Shares in Whitbread rose by almost 5% before falling back in early trading on Tuesday as the hotel and pub company said trading had improved across its UK Premier Inn hotels.

Whitbread, a MoneyWeek tipsters’ share buy,  which said in April that it plans to cut 1,500 jobs in the UK and shut underperforming restaurants, said total sales across the group rose by 1% to £739m for the three months to the end of May, compared with the same period last year.

Mark Crouch, an analyst at investment platform eToro, says: “In what is a sticky period for the hospitality sector, Whitbread say they are confident in delivering their full year projections.”

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

With the Euros football tournament in Germany kicking off earlier this month, the company, which also runs the Beefeater and Brewers Fayre brands, added that its Premier Inn business in Germany had seen a 15% increase in total sales.

Crouch adds: “Premier Inn Germany was the standout performer in Q2 as total accommodation sales grew, while the UK region managed to just about match their performance over the same period last year, as weekend demand, specifically in London dropped off following the post Covid surge in demand.”

Is now a good time to invest in Whitbread?

Dominic Paul, chief executive of the hospitality group, said: "Whilst the normal booking pattern means our forward visibility remains limited, our forward booked position is positive and we remain confident in the full-year outlook.

"This reflects a more encouraging trading performance in the UK, our strong commercial programme and increased cost efficiencies, as well as good progress in Germany."

Paul added that Whitbread is on track with its programme to restructure its food and beverage business announced earlier this year, which will close or convert more than 200 restaurants and cut about 1,500 jobs.

The plan is also designed to add more than 3,500 hotel rooms across its estate and increase "operational efficiencies".

Crouch says: “The hotel sector is Whitbread's bread and butter, and despite economic challenges, the brand is clearly carrying weight with customers at a time when consumer spending is falling. With Premier Inn making up over 70% of Whitbread’s revenue, it’s little surprise the company is moving more of its eggs into their Premier Inn basket.”

Whitbread's planned job cuts

Trouble lies ahead, however, with workers union Unite planning a protest in response to Whitbread’s plans to cut jobs. Unite general secretary Sharon Graham said: “Rarely is a company so shameless as to celebrate leaping profits and dividends by announcing mass job cuts.

“But generating runaway profits while trampling workers is business as usual for Whitbread. This is a firm that refuses to pay the real living wage and does not even provide company sick pay for its underpaid and overworked staff.

“Unite will be holding the company to account for its disgraceful race to the bottom behaviour and offering full support to our members impacted by these cruel and unnecessary redundancy plans.”

Chris Newlands

Chris is a freelance journalist, and was previously an editor and correspondent at the Financial Times as well as the business and money editor at The i Newspaper. He is also the author of the Virgin Money Maker, the personal finance guide published by Virgin Books, and has written for the BBC, The Wall Street Journal, The Independent, South China Morning Post, TimeOut, Barron's and The Guardian. He is a graduate in Economics.