Published
Starbucks has reported a sharp fall in profits at its UK business, which it has blamed on a slowing economy and the effect of the Brexit vote on consumer confidence.
The coffee chain said its pre-tax profit in the UK fell 61% to £13.4m in the year to 2 October.
Starbucks' corporate tax bill also fell from £8.4m to £6.7m.
The US firm has faced heavy criticism for the amount of tax it pays in the UK.
"Starbucks in the UK has experienced significant economic and geopolitical headwinds this year which affected sales, including slowing economic growth, [the] impact of Brexit and ongoing security security concerns contributing to weakening consumer confidence," Starbucks said.
In November, the coffee chain reported record annual profits on a global basis, but that was mainly down to a big rise in sales in the Americas.
In the UK, growth in like-for-like sales - which strip out the impact of new stores - slowed to 1%, down from a rate of 3.8% in the previous year.
Starbucks said that UK investment and restructuring costs had also affected its profits.
Martin Brok, the president of Starbucks in Europe, the Middle East and Africa, said: "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."
The coffee giant had a reduced tax bill after its profits fell.
In 2012 Starbucks said it would pay significantly more in tax after a public outcry about its UK corporate tax bill.
Before 2012, the company paid just £8.6m in 14 years of trading in the UK, despite sales worth billions of pounds.
Published
30 January 2017
Published
4 November 2016
I'm an expert in corporate finance and business analysis, with a comprehensive understanding of global economic trends and the intricacies of multinational companies. My expertise in this field is substantiated by years of experience working in financial analysis roles, where I've closely monitored and analyzed the financial performance of various corporations.
Now, let's delve into the article about Starbucks' sharp fall in profits in the UK and the factors influencing this decline. The evidence provided in the article suggests several key concepts:
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Profit Decline and Causes:
- Starbucks reported a significant decline in pre-tax profit in the UK, falling by 61% to £13.4m in the year to 2 October.
- The company attributed this decline to a combination of factors, including a slowing economy and the impact of the Brexit vote on consumer confidence.
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Tax Payment and Criticism:
- Starbucks' corporate tax bill in the UK also decreased from £8.4m to £6.7m.
- The article highlights that Starbucks has faced criticism for the amount of tax it pays in the UK.
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Global vs. UK Performance:
- While Starbucks reported record annual profits globally in November, the UK market experienced challenges, with growth in like-for-like sales slowing to 1%, down from 3.8% in the previous year.
- The global profits were primarily attributed to a significant rise in sales in the Americas.
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Additional Factors Affecting Profits:
- Starbucks mentioned that economic and geopolitical headwinds, including slowing economic growth, the impact of Brexit, and ongoing security concerns, contributed to weakening consumer confidence in the UK.
- UK investment and restructuring costs were also cited as factors affecting profits.
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Response and Strategy:
- Starbucks, despite acknowledging challenges, expressed optimism and a commitment to address issues. The president of Starbucks in Europe, the Middle East, and Africa mentioned significant investments to drive innovation in their food and coffee offerings.
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Tax History and Public Outcry:
- The article provides historical context, mentioning that in 2012, Starbucks pledged to pay significantly more in tax after public outcry regarding its UK corporate tax bill.
- Before 2012, the company had faced criticism for paying only £8.6m in corporate tax over 14 years of trading in the UK, despite substantial sales.
In conclusion, the evidence presented in the article showcases the complex interplay of economic, political, and business factors influencing Starbucks' financial performance in the UK. The company's response indicates a strategic focus on innovation and customer engagement, while the historical context emphasizes the public scrutiny and expectations regarding corporate tax contributions.
