Coffee giant posts €5.5m loss as stores face closure
COFFEE giant Starbucks lost €5.5m in the Irish market last year after taking a €4m impairment hit on "underperforming stores". The Irish firm's directors attributed the impairment to the "decline in retailing".
Starbucks has recently drawn up a list of seven underperforming Irish stores which may be closed as part of a global plan to cull 100 non-US stores.
The latest figures mean Starbucks Coffee Company (Ireland) lost a total of €7.6m from its 2005 launch to the end of its last financial year on September 30.
The directors said the losses "relate primarily to establishment costs" and stressed that Starbucks' multi-national parent would give the Irish company access to finance if needed.
The 2008 financial year saw Starbucks add eight new Irish outlets, bringing total numbers to 20 and increasing staff numbers from 211 to 296.
The extra stores drove a 55pc rise in sales, to €17.3m. Gross profit rose from €2.14m to €2.97m, but gross profit margins dropped from 29.3pc to 17.2pc "due to adverse changes in commodity prices", the company noted.
A near-doubling of administration charges to €4m and the impairment charge of almost the same amount pushed the company to an operating loss of just over €5m. After interest, pretax losses came in close to the €5.5m mark.
"This year has been very challenging for Starbucks in Ireland," the directors surmised. A company spokesman yesterday added that Starbucks had "developed a strategy to withstand a difficult economy" and had "made difficult decisions".
The company has grown its Irish store numbers to 28, but those are expected to be slimmed down over the coming months as Starbucks examines the prospects of seven underperforming Irish stores identified by estate agents CBRE.