Coffee Republic (LSE: CFE) is struggling to find that one magic coffee bean that would bring joy for the company's financial situation. The coffee house chain operator had another disappointing year with a net loss of £2.5 million.So, despite the company's aggressive expansion strategy, it seems that it is still incapable of generating a substantial profit. The future does look very bright as well.
Experts agree that the UK's economy will likely go into a recession, which unquestionably will have an impact on the company's sales, as more people will cut down their discretionary spending on boutique coffees.
The loss for the fiscal year ended in March has slightly increased from £2.42 million in the previous year to £2.5 million this year. Coffee Republic's sales tumbled 39.8% to £5.8 million as the chain migrated half of its stores into the hands of franchisees.
The number of shops more than quadrupled during the period to 193 from 26 at the end of March 2007, with ten of these overseas. The number of franchise outlets jumped to 53 from 25, with a further 9 franchised operations opened since the end of March.
A Temporary revival?
Peter Breach, Coffee Republic chairman, commented: "This has been a year of significant change with the brand now represented across the UK an in twelve countries overseas. We are still in a turnaround period and our costs have continued to outpace our income as we vigorously invest in the future of our global brand."
The largest coffeehouse company in the world, Starbucks (NASDAQ: SBUX, SBUX message board) less than a month ago announced its first quarterly loss since 1993, which totaled of £3.36 million.
Tougher times are ahead for Coffee Republic and I doubt if the company will be changing its route this year. I assume, the company will keep bleeding. Now the company's strategy is aimed at building up its empire, but when is this going to start generating profit?
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