Starbucks paid £20M to renegotiate leases and close UK stores as its cafe arm lost £17.2M

Starbucks' British store arm lost £17.2 million (about €19.2 million) in the year ended September 2018, a filing showed in June 2019 — a swing from a £4.6 million profit the year before. The company attributed the decline to falling cafe foot traffic in a downbeat economy and consumers who 'want coffee delivered to their homes or desks.'

Unwinding the store base was expensive: Starbucks took a £20 million hit renegotiating leases and closing unprofitable UK locations, where a shift to e-commerce and falling consumer confidence amid Brexit uncertainty had deepened a retail crisis. While shutting weak sites, it expanded drive-through outlets — over 100 owned and licensed already — and began London delivery through Uber Eats, with plans to extend across Europe and the Middle East.

Across Europe, Starbucks shifted more stores to franchisees — handing Latin American partner Alsea rights to France, the Netherlands, Belgium and Luxembourg — while its UK-registered licensing arm boosted profit through a Nespresso capsule deal with Nestlé. 'Doing business in EMEA continues to be challenging,' said EMEA president Martin Brok, citing 'the changing consumer landscape to high rents and political uncertainty.'

The UK cafe business was built on high-street footfall just as consumers moved to delivery and e-commerce, leaving a store base sized for demand that was disappearing.

High UK rents magnified the exposure: every weak site was a lease that had to be paid, renegotiated or exited at a cost.

Brexit-driven political uncertainty and weak consumer confidence depressed cafe visits at the same time, turning a slow drift into an annual loss.

A store network sized for footfall becomes a liability when demand moves to delivery; the lease book has to shrink as fast as the traffic does.

As of the June 2019 filing, Starbucks was pressing on with closures, drive-through expansion and the Uber Eats delivery partnership; its UK store arm and European licensing operation together paid £22.6 million of UK tax that year, up from £13.7 million — a figure that had been a sore subject with British MPs who accused the company of tax avoidance, which Starbucks denied.