Starbucks division pays dearly for its rapid expansion in UK

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The Independent Online

The American coffee shop chain Starbucks racked up another year of losses in the UK in 2002 as it continued its dramatic expansion of the business.

The British offshoot, which was launched six years ago and which now has some 380 outlets around the country, is expected to be profitable by early next year.

But, according to a Starbucks spokesman, losses widened to about £18m in 2002 - largely because of asset writedowns - from about £10m a year before.

The results, which also showed that sales rose to about £140m that year from about £95m, were the latest figures that the company has filed.

The growth reflects the fast pace of expansion at the business. The coffee bar chain currently has about 380 outlets in Britain, after opening 77 shops last year, and plans to have some 425 by the end of this year.

Starbucks is sticking to its rapid expansion strategy. The business, which entered the UK market in 1998 when it paid £50m for 56 outlets from the Seattle Coffee Company, plans to open another 50 or so stores in 2005.

The financial figures also show that the company's US parent injected some £106m into the business to help support its expansion plans.

Worldwide, Starbucks has about 7,500 stores and last November, the US-based chain said both sales and earnings had hit record levels in the past year with group profits up 29 per cent to $436m on sales of just over $4bn, up from $3.29bn a year before.

The company also predicted at the time that the loss-making UK business, which competes with Caffè Nero and Coffee Republic among others, would move into the black in the next 18 months.

Cliff Burrows, the UK managing director, said in November: "The [British] company has recorded like-for-like sales increases of high single digits for the past 17 months and anticipates this trend will continue."