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Originally published Saturday, May 3, 2014 at 8:04 PM

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Starbucks finally perks up in Europe

Starbucks is steaming ahead in Europe and the Middle East after years of struggle. Also, Seattle biotech’s IPO on the Tokyo Stock Exchange takes a tumble, and REI’s tighter returns policy saves millions.


Seattle Times business staff

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Starbucks seems to have broken through that Old World freeze at last.

The Seattle coffee behemoth has long struggled to increase sales in Europe, the Middle East and Africa, regions that many global companies, including Starbucks, lump together under the moniker EMEA.

Europeans, who account for the lion’s share of the EMEA region, for years were chilly to Starbucks’ effort to sell them a re-imagined version of what they themselves invented — the modern coffeehouse.

But Starbucks’ latest quarterly release showed a 6 percent bump in sales for comparable stores in the EMEA region, the strongest in 14 quarters, according to CEO Howard Schultz.

That is “powerful evidence of the success of our continuing efforts to transform that important region,” Schultz said during an earnings call.

Several items contributed to this ramp-up, including favorable exchange rates for the euro and other foreign currencies. A shift to higher-quality offerings, and an improving economy in the U.K., also helped, said Chief Operating Officer Troy Alstead.

One other key: loosening its grip. Starbucks has been emphasizing the opening of licensed stores run by other companies, rather than stores it owns and operates itself.

Uncharacteristically, Starbucks has also dipped its toes into franchising. Last year it began offering franchises in the U.K., and the experiment proved so successful that the company says it intends to begin franchising in France.

According to Starbucks’ French website, ideal franchisees in the land of Molière would be restaurant or hospitality pros with demonstrated leadership skills and 300,000 euros to invest. Good communication skills are de rigueur. “You must be ready to become an ambassador of the brand in your region,” the site says.

Starbucks said in a statement it’s continuing to focus on licensing with new licensed stores in France, Germany and Spain.”

About 60 percent of Starbucks’ stores in the EMEA region are licensed operations, up 5 percentage points from a year ago. In comparison, only 41 percent of its stores in the Americas are licensed.

In the U.K., which has the most Starbucks in the region, some 256 stores were licensed as of March 30, an increase of 57 from a year ago. Company-operated stores, by contrast, shrank by 18 to 529.

Growth in licensed stores in the Middle East was in the double digits. Turkey, with 210 licensed stores, is the region’s second-largest market for Starbucks.

“The strong performance in these markets supports our licensed-focus growth strategy in the region,” Alstead said.

Still, there’s a ways to go for the Old World to become as Starbucks-saturated as the new.

Washington state, with a population of about 7 million, has nearly as many Starbucks as the U.K., with a population of 63 million. California, with about 2,500 stores, easily tops the 2,065 Starbucks has in the entire EMEA region.

— Ángel González: agonzalez@seattletimes.com

Local firm tumbles after IPO in Japan

Seattle biotechnology company Acucela made news in February by going public on the Japanese stock market — the first such foreign listing in many years.

Japan’s market operators hoped others would follow its example.

But that’s not looking good right now. After raising net proceeds of $143 million in its IPO, Acucela shares briefly climbed to 2,460 yen, but then began a sustained slide to half that level. The stock closed Friday at 1,153 yen, or $8.12.

The Financial Times (FT) reported last month that Japan Exchange Group, which runs the country’s exchanges, “is on a charm offensive to woo new issuers.”

Yet while the Tokyo stock market reached a six-year high near the end of 2013, prompting a wave of new stock offerings, “non-Japanese companies have sat out the revival,” FT says.

The head of new listings for the Tokyo exchange, Yasuyuki Konuma, cited the Acucela IPO and told the FT, “We’re contacting companies with connections to the Japanese community ... But we are flexible in trying to attract any kind of foreign company, as long as they meet our standards.”

A spokesman for Acucela said last week that it was still in its post-IPO quiet period and couldn’t comment.

Acucela’s rise and fall coincided with a sudden, broader decline in biotechnology stocks as investors backed off the risky sector; both peaked Feb. 25.

But the Seattle company’s drop has been far sharper — 50 percent versus 15 percent as of Friday.

Acucela, which is working on treatments for macular degeneration and other eye diseases, does have a special link to Japan: Founder, CEO and major shareholder Ryo Kubota is originally from Japan, and his company has a key partnership with Tokyo-based Otsuka Pharmaceutical.

That relationship took a hit shortly before the IPO when Otsuka stopped funding one major research effort at Acucela, forcing it to lay off 30 of its 86 employees.

But give Acucela points for candor: In its most recent U.S. regulatory filing, the company acknowledged those cuts “had and will continue to have an impact on all functional areas of the business.”

“This reduction in our workforce may create concerns about job security or lower productivity, which may, in turn, lead some of our remaining employees to seek new employment and require us to hire replacements,” it continued. “This workforce reduction may also make the management of our business more difficult and may make it harder for us to attract employees in the future.”

Try finding another company that admits that, at least in English.

— Rami Grunbaum: rgrunbaum@seattletimes.com

Tighter REI policy on returns pays off

The return of merchandise long after it was sold was more than a nuisance at REI — it was also a fast-growing, multimillion-dollar problem.

Before the Kent-based outdoor-gear retailer clamped down last June, customers had returned very old items to REI for a total of $60 million over three years.

And returns of merchandise at least a year old were accelerating at four times the growth rate of REI sales.

Chief Financial Officer Eric Artz disclosed those details Monday at the co-op’s annual members meeting in downtown Seattle.

Artz told an audience of about 100 people that REI’s bottom line was boosted last year by fewer returns and better inventory management.

Sales last year rose 5.9 percent to a record $2 billion, enabling the co-op to distribute $114.7 million in patronage refunds, up 10 percent from 2012. REI ended 2013 with a profit of $34.5 million, excluding one-time charges of $24.9 million.

Given how much it was losing in questionable take-backs, it’s easy to see why REI tightened its return policy.

For years, the popular retailer had a policy of no time limits on returns, earning the nicknames Rental Equipment Inc. or Return Everything Inc.

As of June, customers have one year to take back a store item after purchase, or 30 days in the case of outlet merchandise bought online. REI (real name: Recreational Equipment Inc.) makes an exception for defective products, which can be returned regardless of their age.

It’s worked well from the members’ perspective, Artz said. “Our policy was very ambiguous in the past, so now we have something to refer to. The majority of our customers understand why we did it.”

Jerry Stritzke, REI’s new CEO, added, “It’s largely been a pretty positive thing. People have figured it out.”

— Amy Martinez: amartinez@seattletimes.com



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