Starbucks Profits Declining in UK

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Starbucks a popular roadside coffee brand have claimed for declining profits in UK owing to the last year’s Brexit vote.

Further elaborating the conclusions from the report, Starbucks have said that slower economic activity; lack of consumer confidence has collaborated for this sharp decline in profits.

However, Starbucks alone is not the only brand suffering from the dwindling profits after the Brexit vote; many other giant businesses have been heard of whining about the same declining profits.

According to the statistical data obtained, the coffee brand has suffered the huge plunge in pre-tax profits by 61% in a year to 2 October 2016. According to the comparative data showed the profits slumped to £13.4m in 2016 from £34.2m in 2015.

Not only blaming the Brexit, but Starbucks has also talked about the lower High Street Football played owing to the uncertain security situation in Britain as the other big reason for slower sales.

The company in its official statement mentioned the plausible reasons hitting the profits said that:

“Starbucks in the UK has experienced significant economic and geopolitical headwinds this year which affected sales, including slowing economic growth, [the] impact of Bruit and ongoing security concerns contributing to weakening consumer confidence,”

The company also mentioned that sales in stores opened for more than one year were dropped by 1% over the period.

However, with Costa Coffee being the toughest competitor taking the market lead, Starbucks is now reinforced to make shifts and changes in the UK chain.

According to the President of Starbucks for Middle East Africa and Europe Martin Brok:

“Whilst there are undoubted challenges presented by a more cautious consumer environment, lower high street football, 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,”

He also added that ” 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,

Starbucks is seen facing the challenging fate in Britain, with tensions coming in the way for few years.

Previously, the Britain government for tax avoidance in 2012 accused Starbucks. The company was found to pay the tax of 30m for the total of four years against the generated sales of £3.1bn in those corresponding years. Consequently, it had been subjected to extreme criticism, where deliberate corporate tax avoidance was considered a corporate crime and against the ethical business practices. The corporate tax this year has been dropped by £2.7 m in comparison to last year’s £7m.

In attempts to revitalize the profit, Starbucks is now planning to cut down the number of company- owned stores in favor of the stores run by franchisees and on leasing. The company owns a proportion of one-third out of a total of 894 stores in the United Kingdom.

However, on the other side, the company continues to make huge profits with the leading coffee retailers in their native land-USA. In November 2016, Starbucks was again in the news for making record annual profits and that was mainly because of the rise in sales by 11% in America.

The company earned profits of  £4.2bn in a year to 2 October 2016, marking 16% up in profits from the prior year.

The company seems optimistic about the growth in their sales in China and Asia-pacific regions. They see the faster growth of the brand in these regions as the powerful resource for the company to explore and declared this region as profit-earing territory for the decades to come, according to the words of Starbuck boss Howard Schultz.

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