Starbucks UK plunges to loss on store closures and cost rises

Starbucks UK has slumped to an annual loss for the first time since 2013, after it was weighed down by cost increases and store closures.

However, the coffee chain saw its tax bill for the year rise despite posting the loss.

The firm’s taxes have come under significant scrutiny in recent years after it was revealed in 2012 that the business paid only £8.6 million in corporation tax over a 14-year period.

In 2018, Starbucks UK Coffee Company saw its corporation tax bill rise by 22.9% to £4 million.

The UK arm plunged to a pre-tax loss of £17.2 million for the year to September 2018, down from a £4.5 million profit in the previous year.

It said it made the loss after it was impacted by “very challenging” high street trading conditions and “generally low” consumer confidence.

Profitability was also dented after a sharp rise in costs last year, as the firm started its shift towards a franchise-based portfolio and was hit by one-off charges related to closing unprofitable stores.

Higher distribution costs and payroll and investment in fresh food also pushed costs higher during the year, it said.

Starbucks reported a 4.1% rise in revenue to £387.5 million for the year, up from £372.2 million the previous year, despite the downturn in consumer confidence.

The chain’s London-headquartered Europe, Middle East and Africa (EMEA) division also saw total revenues rise 1.3% to 229.5 million US dollars (£180.9 million) over the period.

Starbucks was founded in Seattle in 1971 and is now the UK’s second largest coffee retailer, behind Costa, with roughly 1,000 UK stores.

It has recently closed a number of high street outlets and turned its attention to smaller format units and drive-throughs.

Martin Brok, president of Starbucks Europe, Middle East & Africa, said: “Doing business in EMEA continues to be challenging for Starbucks.

“From the changing consumer landscape to high rents and political uncertainty, there are ongoing pressures across the region.”