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Starbucks reports first UK profits

news
05 February 2015

Starbucks has announced a pre-tax profit of 1.1 million in the year to September 2014, its first profit since arriving in the UK in 1999, retailbusiness.co reported.

According to the company the uptick resulted from a strategy of closing stores with high rent, and by moving to cheaper locations.

According to Starbucks UK managing director Mark Fox, the company's strong performance was the result of a turnaround strategy that had focused on engaging with employees, giving customers more, growing the business and improving its model by rebalancing the stores portfolio and carefully managing costs.

The plan had been in place for the last three years. The period had seen Starbucks close 67 unprofitable stores and open 121 new stores in more profitable locations and formats, taking its total number of stores to 791.

The Seattle-based company had also introduced 'drive-thru' stores to cater to car drivers in a hurry, which had limited success among UK consumers.

Currently the company operates 34 drive-thrus across the UK. In 2011, Starbucks had announced plans to open 200 over the subsequent five years.

Starbucks, had attracted much criticism over its non-payment of UK corporation tax, 11.4 million in corporation tax in 2014, after moving its European headquarters from Amsterdam to London.

Meanwhile, The Guardian reported, a Reuters investigation in 2012 revealed how Starbucks UK had booked cumulative sales of over 3 billion since opening in the UK but had paid only 8.6 million in corporation tax during the same period.

Starbucks executives were summoned before parliament and a consumer boycott was also called. The widespread anger, led the company's then UK boss, Kris Engskov, to pledge waiver of tax deductions for royalties and interest during 2013 and 2014.

The ''deductions holiday'' period expired at the start of last month as Starbucks promised this would generate additional tax of 20 million for HMRC. On Tuesday the company declined to state publicly whether or how that commitment had been met, however, it privately claimed it had been satisfied even as it declined to give further details.

The group offered no comment on whether the controversial tax deductions had resumed.

Earlier, controversial royalty payments cut taxable profits in the UK, which ended up in a complex web of Starbucks companies centred in the Netherlands. The group's aggressive tax structure there ensured taxation of income at a very low rate.





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