Whitbread customers cut back on the Costa Coffee orders

Shoppers are thinking twice before paying for their morning coffee, according to Whitbread, the leisure group behind the Costa Coffee and Premier Inn empires that expects a consumer squeeze to bite household wallets this year.

Boss Alison Brittain said the first seven weeks of the new financial year have been positive, but added: “We remain cautious and expect a tougher consumer environment than last year.”

She told the Standard: “On the coffee side we see a more constrained high street market. We see a pound in everybody’s pocket being spent more wisely.”

Whitbread posted a 0.8% drop in like-for-like sales at its Costa Coffee chain for the 13 weeks to March 2.

The comments came days after the Office for National Statistics reported shock retail sales figures that showed a 1.8% slump in retail spending in March, as consumer wallets succumb to steadily rising inflation and anaemic wage growth.

The City turned on the company following the update, and it was among the biggest fallers on the FTSE 100 earlier. The shares lost 292p, or 7%, to 4015p.

But Brittain was more upbeat as she revealed group sales growth of 8.2% to £3.1 billion for the year to March 2. Underlying pre-tax profit rose 6.2% to £565.2 million.

In its Premier Inn division, which has 68,081 UK bedrooms, sales at hotels open for more than a year increased 2.3%. Eight more London hotels are planned this year. Costa Coffee sales at venues opened for more than a year rose 2%.

Brittain said the company’s £150 million cost savings plan, announced in November, was progressing well.

Plans this year include introducing a bacon roll for £1 when you buy a coffee from next month.