Starbucks mulls potential sale of UK business
Starbucks is weighing a potential sale of its U.K. business, according to several reports.
Why it’s the BFD: The company is facing shifting consumer habits, stiffer competition and unionization efforts in its U.S. workforce, making the prospect of offloading parts of its business more attractive.
Driving the news: Starbucks tapped Houlihan Lokey to explore possible options for the business, the Sunday Times reports. Houlihan Lokey declined to comment.
What they’re saying: The company didn’t immediately respond to a request for comment. It told other outlets that it’s “not in a formal sale process” for the segment, but that it continues to "evaluate strategic options" for its international operations.
- To us, that’s code for "market check" to assess what kind of interest is out there — especially with Houlihan on deck.
Between the lines: Interested buyers could include a specialist franchising group or a private equity player, the Financial Times says, citing a person familiar with the matter.
💭 Our thought bubble: Food and beverage chains have increasingly opted to sell off stores, preferring to go with a more asset-light model, which also happens to be higher margin.
- With international locations, it's also much easier to find an overseas operating partner who pays royalties back.
Context: Starbucks has about 1,000 stores in the U.K., with about 70% of them owned by franchisees.
- Business in its region is “contending with operating cost increases at the same time as competition intensifies,” it said in a report for its U.K. and EMEA accounts for the fiscal year ended October 2021.
- It is also trying to adapt to a decrease in foot traffic in its stores near offices, travel points and city locations tied to work-from-home and other pandemic trends.
Flashback: The company suspended financial guidance for the rest of the year in May as it missed Wall Street analysts’ sales expectations due to inflationary pressures and strict COVID-19 curbs in China that had limited its business there.