Coffee Republic confident of boost from new format
British café chain Coffee Republic today said its recovery was well on track after a string of disposals and a switch to a new deli format helped arrest a slump in sales.
The group, which has been shedding under-performing bars to focus on a profitable core of 50, said like-for-like sales in July and August were 1% ahead of a year ago.
This was in contrast to its performance over the year to March 28 when same-store sales fell 2.3% – sparked by poor trading in central London.
However, losses for the same 12-month period narrowed to £1.7m (€2.5m) from £9.8m (€14.6m) and were described as an “important milestone” after Coffee Republic reduced its estate and secured new financing.
At the heart of its turnaround plan is a move away from standard coffee bars to the deli format, which offers fresh sandwiches and hot food counters.
It has also turned its back on the fad for sofas as it battles to improve margins and cut exposure to competition from rivals such as Starbucks, Costa Coffee and Caffe Nero.
Four sites are already trading with the new format and sales at its most recent opening conversion at Heathrow Airport are up 30% on a year earlier.
According to chairman Bobby Hashemi, this performance was in line with initial expectations of average sales growth of more than 20% at converted bars.
Coffee Republic was forced into a painful restructuring after trading suffered in the wake of economic and tourism downturns since 2001.
Its estate was effectively halved to the current 55 bars while new equity and banking facilities were secured in November, improving the group’s financial stability.
Mr Hashemi said: “The past financial year has marked a turning point for Coffee Republic.”
Although annual like-for-like sales were lower than a year ago, this masked a contrasting picture – with declining sales in London offset by growth elsewhere.
A fall of 27% in total sales to £22m (€32.8m) reflected the closure of surplus bars, Mr Hashemi said.
The roll-out of the new deli format is to continue into 2005 with 10 bars earmarked for refurbishment by the end of March.
“This is a measured and prudent roll-out schedule to ensure that each opening delivers the requisite return with no unnecessary cost overruns,” he said.
Coffee Republic is also experimenting with a scaled-down deli offering at smaller sites, including at Tottenham Court Road in London.
Shares improved 11% to 0.83p today.
