Starbucks Sales Fall For First Time In 16 Years

Starbucks' turnover dropped last year for the first time, in the wake of revelations about its corporate tax practices.

Sales for the year to September 29 were £399m, a decline of 3.4% compared to the previous year.

The company said the decline, the first since it started UK operations 16 years ago, was due to the closure of unprofitable outlets and not the result of other reasons.

It reduced its average UK workforce by 11.6% in the financial year to 7,726.

Starbucks was able to increase its gross profit by 13% to £79.7m, before deductions of £100.5m were taken into account.

Its pre-tax loss was £20.4m in the period, down from the £30.4m recorded in the 2011-12 financial year.

The company's tax liability in the period was £3.4m, but including deferred taxation was reduced to £2.25m.

It said the £10m fall in the pre-tax loss was largely due to the rise in gross profits. Its staff costs dropped £13.5m in the tax year compared to the previous year.

Executives from Amazon, Google and Starbucks were grilled by MPs in 2012

In a statement given to Sky News, Starbucks said: "This has been another quarter of strong growth for Starbucks across the EMEA region, with profitability more than tripling year-on-year and revenue growth of 13% the highest in two years."

In accounts filed with Companies House the firm said of its British operations: "The company is being supported by an improving economic environment in the UK which is predicted to continue through 2014.

"This in turn is expected to lead to an increase in comparable (like-for-like) sales per store and, alongside the realignment of our portfolio, a further reduction in the loss before tax next year."

The company's accounts started on September 30, 2012 and in October and December of that year key executives were grilled by MPs about multinational corporate (MNC) arrangements.

Revelations about royalty, licensing and transfer pricing structures used by MNCs to minimise UK tax burden were explored by the Public Accounts Committee.

Seattle-based Starbucks was quizzed on why it remained a loss-making business for tax purposes while telling investors it was profitable.

Groups such as UK Uncut urged boycotts of Starbucks and organised store protests and the company's unmoderated website blog was flooded with hundreds  of critical comments.

But the company said the latest sales drop was not related to the 2012 tax furore.

However, the latest accounts filed show that it is acutely aware of the impact certain issues may have on the company.

It said there was potentially a "significant risk" of "adverse impacts resulting from negative publicity regarding the company's business practices".

Responding to the widespread criticism in late 2012 it offered to pay a voluntary £20m in tax over two years, and has already given £15m of that to HM Revenue and Customs.

It also dropped total director remuneration by almost a fifth to £886,000, with the highest paid executive's salary falling by more than half to £268,582.

At the end of last September Starbucks had 549 company-operated stores in the UK, down 44 in the period.

It also had 125 licensed and 57 franchised operations. Although it has a planned franchise expansion, the company's website says it is not looking for new partners.

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