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Starbucks mulls potential sale of UK business

Kimberly Chin
Jul 18, 2022
Customers line up to enter Starbucks Coffee in the U.K.
Photo: Michael McNerney/SOPA Images/LightRocket via Getty Images

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.

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