TACTICAL EXPANSION
Taste Holdings to expand Starbucks over 18 months in order to break even
TASTE Holdings is planning to expand its Starbucks brand over the next 18 months to enable its food division to break even.
Taste chief executive Carlo Gonzaga said the expansion would be primarily to KwaZuluNatal (KZN).
He said the company wanted to have 10 trading Starbucks outlets by the end of the year, with a solid pipeline for another 12 next year.
“We are going to open two Starbucks in KZN and one will be opened next month,” he said.
“Cape Town will get its chance on Starbucks next year.”
Starbucks will enter the KZN market in November with the first store in Florida Road, to be followed by a 400m² site in Gateway Theatre of Shopping.
Taste brought Starbucks this year and Domino’s Pizza in 2014.
Gonzaga said both brands had proven popular with local consumers.
In the six months to end August, Taste’s food division had 69 stores with 6 Starbucks and 63 Domino’s corporate-owned stores, up from 34 stores reported a year ago.
The division consist of Starbucks, Domino’s, The Fish & Chip Co, Zebro’s Chicken and Maxi’s brands.
Its luxury goods division consists of retail outlets branded under NWJ, Arthur Kaplan and World’s Finest Watches.
The company said group revenue for both divisions decreased 9 percent to R483.1 million, down from R529.2m, while gross profit rose 4 percent to R207.8m, up from R200.6m as compared to last year.
Operating profit extended losses to R73.3m, compared to R41.2m last year, and headline loss per share took a knock to 15.9 cents a share. Last year the loss amounted to 9c.
Gonzaga said after multiple years of record financial performance, the luxury goods division experienced its toughest six months since 2008.
“Given that luxury goods are cyclical and tend to closely follow the exchange rate, disposable income and consumer sentiment, we fully expected a sales decline in the luxury goods division.
“What we didn’t expect was the speed and depth of the decline,” Gonzaga said.
He added that while the first quarter same-store sales declined 19 percent, this slowed in the second quarter to 11 percent and in the last quarter to September this decline again improved to 3.4 percent.
In April Taste announced plans to sell off the luxury goods division in the future.
Gonzaga said having initiated the sale process, it was swiftly evident that the current timing was not ideal and the group has stopped the process.
He said Taste would continue focusing on the operational and tactical requirements for both divisions.
Taste shares declined 3.23 percent on the JSE yesterday to close at 90 cents.