Starbucks burdened by high London rents

Starbucks UK has confirmed less profitable outlets in central London locations have contributed to its five-year run of losses.

Kris Engskov, UK managing director, said the global coffee chain was “making strides to improve its bottom line” by closing or relocating less profitable outlets, including three stores on London’s Oxford Street.

In 2011, Starbucks UK opened 42 new sites but closed 12 stores, and made a loss of £32.9m for the year to last September, despite reporting growth in like-for-like sales over the past 11 quarters.

In the company’s second quarter fiscal results 2012 for the 13 weeks ended 1 April, its Europe, Middle East and Africa (EMEA) region recorded an operating loss of $5.5m (£3.5m), compared to operating income of $7.7m (£4.9m) for the same period a year ago.

Last month, British Baker reported that Starbucks UK was looking to place 16 of its central London sites on the property market in a bid to cut down rental costs, with the help of commercial property services company CBRE.

This included stores based on Wigmore Street, Villiers Street, Baker Street and a further two locations on the King’s Roads, which are valued between £32,500 and £206,000.

A Starbucks UK spokesperson told British Baker: “As is the case in all retail businesses, we regularly review our store portfolio, and as a result we are continuously marketing a number of sites while simultaneously looking for new locations. Over the course of this year, we anticipate our overall store count to continue to climb as we ensure that we have the right store portfolio, in the right places.”

The company is currently investing £8m on refurbishing its coffee shops in the capital ahead of the Queen’s Jubilee celebrations and London 2012 Olympic Games this summer. This includes six more high-profile renovations and 70 refurbishments in London.

Starbucks has said a total of 766 stores in the UK and Ireland will undergo a revamp under its refurbishment plans.

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