Bloomberg News

Starbucks to Move European Base to London After Tax Dispute (2)

April 16, 2014

Customers Sit in a Starbucks Coffee Shop in London

Customers use personal laptop computers as they sit in the window of a Starbucks Corp. coffee shop in London. Starbucks - which opened its first European stores in 1998 - said the U.K. is its largest and fastest-growing market in Europe. Photographer: Jason Alden/Bloomberg

Starbucks Corp., (SBUX:US) the world’s biggest coffee chain, will move its European head office to London from Amsterdam, increasing the amount of tax it pays in the U.K. following criticism over the matter last year.

The move will concentrate “a modest number” of senior executives in the U.K. capital, with some being transferred from Amsterdam, Starbucks said today by e-mail. The Seattle-based company also said it means it will pay more tax in the U.K.

British lawmakers and activist groups blasted Starbucks last year, saying the company used complex accounting methods to minimize its tax burden. The coffee chain said last year it would pay 10 million pounds ($16.8 million) of U.K. corporation tax in both 2013 and 2014.

“They had been taken to task in the U.K. for tax -- a perception that they were not paying their fair share of taxes,” Sara Senatore, an analyst at Sanford C. Bernstein & Co. in New York, said in an interview. “My interpretation is that this might be a response to that.”

The move also makes sense from a business perspective because the U.K. market is large and important, she said.

Politicians and groups that had criticized Starbucks said today that while they welcomed the relocation, they also wanted to see how it works out in practice.

“If Starbucks are going to pay more tax in the U.K., that’s a good thing, and it’s a victory for consumer pressure,” Margaret Hodge, chairwoman of the House of Commons Public Accounts Committee, said today in a statement. “But we’ll have to wait for more detail.”

European Operations

Starbucks -- which opened its first European stores in 1998 -- said the U.K. is its largest and fastest-growing market in Europe. Shifting the regional head office to London will enable management to better oversee its business in the country, where it has more than 780 cafes and plans to open more than 100 outlets this year.

The coffee seller’s European business has struggled recently compared to the U.S. and its China and Asia Pacific region. Same-store sales (SBUX:US) were unchanged in the company’s fiscal 2013 in Europe, the Middle East and Africa. They rose 8 percent in the U.S. and 9 percent in China and Asia Pacific.

“This move speaks for itself,” Kris Engskov, head of Starbucks Europe, Middle East and Africa, said in the statement. “London is the perfect place to grow our European business.”

Creating Jobs

The openings will create 1,000 permanent jobs in Britain, where Starbucks already has more than 7,500 employees.

“We think that’s great if they want to move to London, as long as they pay their fair share of tax like the rest of us,” said Sarah Kwei, a spokeswoman for activist group U.K. Uncut.

Starbucks is the latest in a wave of overseas companies moving head offices to London, lured in part by the country’s declining corporate taxes. General Electric Co.’s oil and gas unit and Chinese developer ABP (China) Holdings Group Ltd. were among those that moved to the U.K. capital last year. The U.K.’s base corporate rate is now 21 percent, down from 28 percent in 2010.

Starbucks shares (SBUX:US) rose 2.8 percent to $70.79 at the close in New York. They have lost 9.7 percent this year, while the Standard & Poor’s 500 Index has gained 0.8 percent.

To contact the reporters on this story: Katarina Gustafsson in Stockholm at kgustafsson@bloomberg.net; Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Kevin Orland at korland@bloomberg.net; Celeste Perri at cperri@bloomberg.net


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Companies Mentioned

  • SBUX
    (Starbucks Corp)
    • $74.92 USD
    • -0.55
    • -0.73%
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