Starbucks records first profit in the UK in 17 years

A profit was posted for the first time since Starbucks opened in Britain 17 years ago.

The world’s largest coffee bar chain, Starbucks, made a profit in the UK for the first time since the franchise first opened a store in Britain over 17 years ago. Starbucks cited the improvement was down to a turnaround plan aimed at reducing store costs.

Starbucks has 791 stores in the UK and announced pre-tax profits of £1.06 million in the edited highlights of its full UK profits, which were released this week. The full accounts have yet to be filed with Companies House.

Since 2011 the franchise had closed 67 if its loss-making stores which pushed its operating margin into positive territory.

“The company’s strong performance is the result of a turnaround strategy that has focused on engaging with our employees, giving customers more, growing the business and improving our model by rebalancing the store portfolio and carefully managing costs,” said Mark Fox, UK managing director of Starbucks.

Fierce competition from Costa

It seems the company has found the UK market harder to succeed in than expected and has come under pressure from Costa Coffee, the UK’s biggest coffee shop chain. Analysts attribute the success of Costa to its aggressive store opening strategy that has seen the number of Costa stores grow to more than double that of Starbucks.

However, since 2011 Starbucks seems to have tried to emulate this and opened 121 more stores in “more profitable locations and formats” that, combined with the cost cutting plan, has boosted gross profits by almost a quarter.

Despite only recording profits of just over £1 million, Starbucks has indicated that its 2014 corporation tax charge will in fact be more than £12 million, however, the group has yet to disclose the breakdown of the factors that have contributed to this bill.