Harris + Hoole post $20m loss

To be brutally honest, it can be hard to understand the Tesco-backed coffee chain Harris + Hoole. On one hand their parent company is actively scaling back their expansion – Tesco closed six stores earlier on this year due to poor trading figures – but they triumphed in the recent European Coffee Awards when they took home the gong for the Best Coffee Chain in the United Kingdom and Ireland.

You would imagine that the Harris + Hoole question could morph into a linger problem that haunts the corridors of Tesco HQ, a bit like the West Lothian Question  is the topical spectre of British politics. The entity is obviously held in high esteem by those industry professionals who voted for the continental awards, but incoming revenue streams are quite hard to come by.

And now Harris + Hoole has recorded another annual loss.

According to the latest set of accounts filed with the UK’s Companies House, the plus featuring coffee shop made a pre-tax loss of $20m in the year to February 23^rd this year. Worryingly that figure is more than twice the losses incurred the previous year ($9m).

Chief executive Nick Tolley has attempted to play down these numbers, claiming that they were to be expected. The losses, he explains, “reflect the early life cycle stage of a number of the shops open at the end of [the year-long period] and also the early development costs of the business.”

“The UK coffee market is highly competitive and already served by a number of international, national and local competitors.

“Harris + Hoole’s strategy continues to focus on delivery the best coffee experience on the high street by training the most engaged baristas in the industry, forging close relationships…and using the highest grade [of] ethically sourced coffee,” Tolley added.

Avid readers and followers of the coffee sector may well remember that outrage was associated with Harris + Hoole’s early years. When the company first started appearing, people were happy to visit this independent-looking and enthusiastic shop that seemingly offered an alternative to the likes of Starbucks and Costa Coffee, but were then shocked to find the corporate retail giant Tesco was pulling the strings.

In this writer’s opinion it is probably this conflict that is holding the chain back to some degree, but just how much is open to a lot of reasoned debate. But nobody can doubt the chain’s potential.

But despite the obvious potential, financial backing and ‘independent’ stance and philosophy, this $20m loss has the ability to derail its future.

Tesco’s former chief executive, Phillip Clarke, made the move to install Harris + Hoole shops into some of their larger stores in a proactive bid to increase custom. However, Mr Clarke was replaced in September by Dave Lewis who has indicated that he would be willing to sell off ‘non-core’ assets, which has placed Tesco’s long-term relationship with Harris + Hoole in doubt.

photo: Tesco, flickr – Creative commons