Fri 5th Apr 2024 - Exclusive: Starbucks UK reports systemwide sales pass £1bn for first time Exclusive – Starbucks UK reports systemwide sales pass £1bn for first time: Starbucks UK has reported it surpassed £1bn in systemwide sales for the first time for the year ending 1 October 2023. The company stated: “The company achieved positive like-for-like sales growth across stores that have been opened for 13 months or more during the period, and grew its operating margin, despite the economic headwinds seen in 2023. The company also hit a significant system sales milestone (i.e. sales generated across all ownership types), surpassing £1bn in system sales across company owned and licensed stores. During the period, the company placed a strong emphasis on digitalisation and technology, enhancing its loyalty programme leading to growth in the programme's active members. This focus has improved customer convenience but has also fostered increased engagement and loyalty, translating into higher frequency and spend. The company will continue to build upon this in 2024 through the rollout of further digital initiatives (including further upgrades to the Starbucks app and new features to its loyalty programme). The company has responded to changing consumer preferences and economic conditions by actively managing its menu offerings and pricing strategies. The value of an average customer basket saw an increase year on year, driven by the increase in the popular cold beverage platform with drinks like the Refresha CRl Drink, Iced Shaken Espresso and Clotted Cream Cold Fudge Brew. Growth was also seen in customers attaching food to their purchase with items like egg bites and cake pops performing strongly. Selected strategic price increases were also taken in line with rising input costs into the business.” Starbucks UK reported turnover increased 22% to £547,672,000 compared with £449,257,000 the previous year. Of that, £336,688,000 came from company operated stores (2022: £282,651,000), £207,848,000 from licensing and franchising (2022: £165,896,000) and £3,136,000 from store value card breakage (2022: £710,000). Pre-tax profit was up to £16,870,000 from £10,396,000 the year before. The company paid corporation tax of £7.2m, up from £4.6m the previous year. That represented an effective tax rate of 42.4%. The company, which has outlined plans to add 100 sites for the second year in a row, said it also improved productivity within its labour force during the period. In addition, FY22’s operating margin was impacted by a one-off “sharing in success” bonus paid to staff within the period. The company has now launched a new performance-linked bonus for store supervisors and baristas, “which allows green-apron partners to share in the company's success on an ongoing basis”. The number of employees during the period increased to 5,683 from 5,177. The company opened 42 new company operated stores during the period while six stores permanently closed as they reached the end of their lease term. The company increased the number of licensed stores by 75. Starbucks UK ended the year with 1,168 stores (2022: 1,066 stores). Of that 354 stores were company operated (2022: 318 stores) and 814 were licensed/franchised stores (2022: 748), representing a 30/70 ratio (2022: 30/70). In total, the company had 335 drive-thru stores at the end of the period, of which 39 were company operated stores, and 296 were licensed stores. The company said it continues to seek growth through its licensee partners as part of its strategy while also growing its company operated estate. Net impairments in the year were £2.9m, including impairments on 67 stores of £5.2m (2022: 39 stores: £4.9m), and reverse impairments on 33 stores of minus £2.2m (2022: 24 stores: minus £1.9m). Operating profit for the period increased to £21.7m (2022: £12.6m) and the operating margin increased to 4.0% (2022: 2.8%). Starbucks said the increase in margin was primarily due to increasing operational leverage from a larger store portfolio, the outperformance in the cold beverage platform, and improvement in average basket value per customer. No dividend was paid (2022: nil). Starbucks UK features in the Premium Club Turnover & Profits Blue Book, the next edition of which will be released next Friday (12 April) and feature 901 companies. Starbucks’ turnover of £547,672,000 is the 24th highest in the database. The Blue Book ranks companies by turnover, profit and profit conversion, listing directors’ earnings for the past five years. Companies can now have an unlimited number of people receive access to Premium Club for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email kai.kirkman@propelinfo.com to upgrade your subscription.