Brexit vote's bean bad for Starbucks: Coffee giant's UK sales, profits and taxes plunge

William Turvill
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Starbucks Raises Prices For Second Time In A Year
Starbucks first entered the UK in 1998 with an outlet in Chelsea (Source: Getty)

The Brexit vote contributed to a plunge in sales, profits and corporation tax for Starbucks in the UK.

The US coffee company said it has “experienced significant economic and political headwinds this year which affected sales, including slowing economic growth, impact of Brexit and ongoing security concerns contributing to weakening consumer confidence”.

Profits were also hit by costs relating to UK store reorganisation.

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What’s the damage?

Turnover from continuing operations fell from £405.6m to £379.9m in the year to 2 October 2016.

The Companies House accounts show pre-tax profits came in at £13.4m, down from £34.2m the year before.

The document also shows that Starbucks’ UK business paid £6.7m in corporation tax, down from £8.4m in the year to 27 September 2015.

Why it’s interesting

Starbucks said that “external factors had a significant impact” on its performance. The company listed a number of potential risks facing the “retail specialty [sic] coffee market environment [which] remains highly competitive with all of the main players seeking to grow market penetration”.

Among other risks, it listed: economic conditions; “damage to the brand by not maintaining product integrity or by not innovating new products”; “negative publicity regarding the company’s business practices or the health effects of consuming its products”; a “loss of business confidence through failure to maintain or build market share in the intensely competitive UK specialty [sic] coffee market”; and a “significant increase in the market price or significant decrease in the availability of high-quality Arabica coffee or fluid milk”.

During the year, Starbucks, which has 894 stores across the UK, invested in “lighter food options” and raised employee wages to the national living wage.

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What the company said

Martin Brok, president of Starbucks across the Europe, Middle East and Africa (EMEA) region, said:

It is thanks to the hard work of our partners all around the country that we have recorded a UK profit for the third straight year. Whilst there are undoubted challenges presented by a more cautious consumer environment, lower high street footfall, and adverse currency impacts, we are investing significantly to drive innovation in our food and coffee offering, and are greatly encouraged by our customers’ response. We also continue to focus on strategically remodelling our store portfolio to reflect changing customer demands. The UK remains one of the most important EMEA markets for us and we will continue to grow where our customers want to find us.

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