STARBUCKS Corp reported an annual loss in its UK operations, saying foot traffic at its cafes declined in a downbeat economy and as consumers want coffee delivered to their homes or desks.
The company’s British store arm lost £17.2mil (US$22mil) in the year ended September 2018, after a profit of £4.6mil a year earlier, according to a filing Thursday.
The shares were little changed in early New York trading.
Starbucks took a £20mil hit related to renegotiating leases and closing unprofitable stores in the United Kingdom, where a shift to e-commerce and a fall in consumer confidence amid political uncertainty over Brexit have deepened a retail crisis.
While shutting weak locations, the company is expanding its roster of drive-through outlets in the United Kingdom, which already includes more than 100 owned and licensed shops. It has also begun delivery in London through a partnership with Uber Eats, which Starbucks plans to expand to other locations across Europe and the Middle East later this year.
Across Europe, Starbucks has been shifting more of its stores to franchisees. Last year it gave long-time Latin American partner Alsea SAB the rights to open and run cafes in France, the Netherlands, Belgium and Luxembourg, where its presence is relatively limited compared with the United Kingdom.
Starbucks’ European licensing operation, also registered in the United Kingdom, boosted its profit in the latest year via a deal with Nestle SA to distribute the US company’s coffee in Nespresso capsules.
“Doing business in Europe, Middle East and Africa continues to be challenging for Starbucks. From the changing consumer landscape to high rents and political uncertainty, there are ongoing pressures across the region,” Martin Brok, the company’s president in Europe, Middle East and Africa, said in a statement.
The UK cafe business and the European licensing arm together paid 22.6 million pounds of tax in Britain, up from £13.7mil a year earlier. That’s been a sore subject for the company in recent years, with British lawmakers accusing US multinational companies of tax avoidance -- which Starbucks has denied. — Bloomberg