Starbucks is to open 140 new coffee shops in the UK this year after its British operation swung back into the black from losses in 2020 and resumed paying corporation tax.
In the first year of the pandemic, the US-owned chain received a tax credit of £4.4 million in the UK after racking up a pre-tax loss of £40.9 million.
The business, which has more than 1,000 outlets in Britain, was forced to seek a £25 million loan from its US parent to help offset a decline in trading. It has paid back the loan and confirmed that it had taken none of the government support in the form of Covid loans or furlough money.
According to accounts to be filed this week at Companies House, revenues in the year to October 3 rose by 35 per cent to £328 million as sales recovered in its company-owned stores and franchised sites. At the operating level, it swung from a loss of £37.4 million to a profit of £16.5 million.
Starbucks, which was founded in 1971, has more than 33,000 cafés and entered Europe in 1998. The UK is its biggest European market. At the year-end it had exactly 1,000 stores, of which 297 were company-owned and 703 run by franchisees. Last year it opened 14 company-owned stores while five shut permanently. It said that since the pandemic it had sought rent concessions from landlords of sites where trade had been hit and to “restructure leases”.
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It said: “We successfully managed to negotiate rent concessions with many landlords in the year. Where leases are no longer competitive, we will use break clauses in lease agreements.”
The company expects to open about 140 UK stores this year, half of them drive-thru sites. It also continued to increase its delivery business, adding deals with Just Eat and Deliveroo during the year that lifted the proportion of sales from delivery channels to 9 per cent. The average spend on a delivery order was £12 compared with £5 instore.
Starbucks admitted its sales had been affected by the still-sluggish footfall in high streets and said that some of the pandemic trends were persisting “with working from home and hybrid working evidently now a normal pattern of life for many Starbucks’ customers”.
Like many companies, Starbucks has been impacted by shortages of HGV drivers and packaging, rising supplier costs and shipping delays as well as labour shortages. In response to the inflationary pressures it lifted prices on espresso-based drinks by 3 per cent.
The company also files accounts this week for its Europe, Middle East and Africa (EMEA) business, which is based in London and comprises 3,900 stores in 43 markets but excludes the UK operations. Improving revenues pushed the division from a loss of $74 million to an operating profit of $40.5 million.
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Starbucks EMEA reported a UK corporation tax charge of $13.2 million compared with $3.1 million the previous year as it returned to the black.
Headline profits of Starbucks EMEA include dividend income of $150 million, down from $183.4 million in 2020.
Duncan Moir, president of Starbucks Europe, Middle East and Africa, said the company had continued to be impacted by Covid this year as the Omicron variant hit the industry, although since the easing of restrictions it had experienced “a sharp bounce-back”.
