Starbucks UK extends losses as pandemic takes its toll

Starbucks slumped to a £41 million loss in the UK in the past year as the Covid-19 pandemic took its toll on the coffee shop chain.

The company published its latest results with Companies House, which showed revenues in the year to September 2020 fell £243 million, down 32.7% due to the heavy restrictions imposed during much of the year.

But despite the pandemic, Starbucks continued to pay their staff in full and did not take any Government furlough money for its non-franchised stores, which account for around 30% of all sites in the UK.

There was some recovery for the company when stores were allowed to reopen in the summer, with UK city centres trading at 34% of levels the previous year, rising to 56% by September 2020.

Bosses in the UK continued paying rents during the entire pandemic period covered by the results, although they did enter into lease negotiations to agree reductions where possible.

They also invested heavily to support delivery platforms including Uber Eats and Just Eat to tap into the home delivery market alongside an acceleration of a store portfolio review.

Starbucks did not make any redundancies during the period and has subsequently hired 400 new staff across the UK.

Its financial position was also helped by the waiving of royalties to its parent company, although the coffee chain took a £1.8 million hit from permanently closing three stores and a further £10.4 million charge against 35 underperforming ones.

Across its European, Middle East and African estate, the business revealed sales fell 32% overall to 168 million dollars (£121 million), with 86% of stores closed during the peak of the pandemic in April 2020.

The Middle East and Turkey was particularly strong, with 167 new stores opening and the rollout of drive-thrus boosted sales by 24%. But strict lockdown measures across Europe hit revenues there by 71%, the company added.

Looking forward, the company said: “Starbucks is continuing to assess and respond to government mandated rules on social distancing and operational practising, navigating local and national lockdown rules in the UK and EMEA (Europe, Middle East and Africa).

“The region continues to be supported by Starbucks Corporation, given the strategic importance of the UK market to trial new initiatives in coffee, food service and point of sale.

“The business expects a continued shift of consumer behaviour which will drive further evolution of its stores, locations and offerings in the future.”