The return of Starbucks?

Profits on the rise?

The recession hit Starbucks hard the world over, but particularly in the UK and Europe. In fact, over the last 12 months the coffee giant reported losses of £52.1 million after taxation compared with a loss of £46.9 million the previous year. What must have stung even more is that rival Costa reported a 60 percent increase in operating profit over the same period.

Whether it has anything to do with Costa's recent advertising campaign, featuring adverts boasting that ‘Starbucks drinkers prefer Costa' and ‘Seven out of 10 coffee lovers prefer Costa', is unclear.

What is clearer is that Starbucks believes its fortunes are about to change.

"Rigorous action to improve the customer experience"

In its latest financial report, the company claims that new initiatives such as the introduction of 100 percent certified Fairtrade espresso in all UK stores and a customer reward programme had yielded rewards.

"There was evidence that consumers responded to these initiatives and the year ended with record numbers of consumers in stores," said the report, adding that "management took rigorous action to improve the customer experience and to provide customers with greater value for money" - something the coffee chain has been criticised for in the past.

Starbucks has also been investigating new avenues of trading and earlier in the year, announced plans to open 29 motorway service outlets in the UK over the next 16 months, replacing Welcome Break's Coffee Primo own-brand. The company has also opened concessions in New Look clothing stores, following the closure of its 36 Starbucks concessions in Borders, which went into administration before Christmas.

Despite profit slums, store performance has actually been good with comparative store sales rising by 3.9 percent in the quarter to 27 December 2009, with sales in December alone up 6 percent.

Anya Gascoine-Marco, senior project manager at Allegra Strategies said of the report, "Starbucks have cut prices and have reviewed their estate - the Borders stores were the worst performing and didn't close until December. They are on a journey to getting back to breaking even."

While the company is nowhere near the powerhouse it was in the early 2000s, it appears that Starbucks may slowly but surely be making a comeback..

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