Losses Double At Harris + Hoole

The most obvious roadblock on the path to expansion is money, or the lack thereof. For the British coffee chain Harris + Hoole finances aren’t necessarily a primary concern. Being part-owned by Tesco allows for some wanton spending.

But only some.

As a result of the chain opening 22 new shops in the past year, losses at the company have doubled. And with Tesco’s latest chief executive being slightly frosty towards the idea of a supermarket-owned chain, is the clock ticking?

Pre-tax losses have increased from £12.8m ($19.37m) to £25.6m ($38.7), and accounts reveal that the company will require at least £6m ($9m) of funding from Tesco up until the end of 2017.

It is believed that Tesco will commit to providing a certain level of financial support to the expanding chain. Crucially, the supermarket will not seek the repayment of loans, estimated to be in the region of £48m ($72m), and interest owed for the next twelve months.

What happens afterwards is anybody’s guess.

Former Tesco chief executive Philip Clarke saw Harris + Hoole as something that could drive footfall towards its larger Tesco Extra stores. And given the global coffee boom, there is a strong argument to be made that his desire to see the chain succeed was born out of the right ideas.

However, things haven’t been going smoothly from the major supermarket. Its core business areas are in decline amidst increased competition from budget competitors, and Harris + Hoole isn’t performing as expected.

You may remember that many people felt duped when it emerged that Tesco was behind the small and artisan coffee chain. In the immediate aftermath, income revenues dropped.

Current chief executive Dave Lewis is thought to see Harris + Hoole as a distraction. Back in March, Mr. Lewis disposed of key proponents of the coffee chain, noticeably Michael Holmes who was then in charge of Tesco’s in-store food and drink outlets.

Also, around the same time, the founders of Harris + Hoole quit the business.

With increased losses, a sceptical chief executive and fierce competition on the United Kingdom‘s high street, is it a case of how long can Harris + Hoole last until the plug is pulled?

photo: Tesco, flickr – Creative commons