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NEW YORK (Jan. 28) - Starbucks Corp. announced a new round of store closures and layoffs as it reported Wednesday that its profit dropped 69 percent in its fiscal first quarter with sales continuing to slide.

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The company plans to close 300 underperforming stores around the world by the end of the fiscal year in addition to the 600 it already planned to close in the U.S. The company has already closed 384 of those stores.

The additional closures could result in the loss of 6,000 in-store jobs. Starbucks also plans to lay off about 700 non-store employees.

It also has reduced the number of new stores it plans to open.

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The cuts and changes will result in about $500 million in savings in fiscal 2009, the company said.

Edward Jones analyst Jack Russo said the cuts make sense given the decline in Starbucks' sales in recent quarters.

"This is going to be a transition year," Russo said. He said the company will have to "claw their way back."

Wall Street had largely expected Starbucks to report dismal performance for the quarter, which ended Dec. 28, because it had warned last month that slow sales likely would cause it to miss analysts' estimates.

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Heeding the company's warning, analysts lowered their average expectation from 22 cents per share to 17 cents per share.

But the company still fell short, with net income of $64.3 million, or 9 cents per share, down from $208.1 million, or 28 cents per share a year earlier.

Excluding charges from closing the 600 U.S. stores and 61 stores in Australia, the company said it earned 15 cents per share in its first quarter.

Revenue fell to $2.62 billion from $2.77 billion, while analysts had predicted revenue of $2.70 billion.

The revenue drop stemmed from a 9 percent decline in same-store sales, or sales at locations open at least a year, considered a key gauge of restaurant and retail performance. That dip was worse than the company's fourth-quarter decline of 8 percent.

The company's U.S. same-store sales dropped 10 percent in the first quarter.

Starbucks also said its Chief Executive Howard Schultz will be paid just $10,000 in base salary for fiscal 2009, including health insurance and other benefits. His salary was $1.2 million in 2008.

Schultz still could take home more compensation in the form of stock options. In the last fiscal year, he received stock options worth $7.8 million when granted, which helped boost his total compensation near $10 million.

The company said it plans to open only 140 new stores in the U.S. in fiscal 2009, down from its previous target of 200. Overseas, it will open 170, down from the 270 it had planned to open.

The company also said it will not provide any sales or earnings guidance "given the uncertainty in the global consumer retail environment."

Shares fell 49 cents, or 5.1 percent, to $9.16 in electronic after hours trading after rising 5.5 percent during regular trading Wednesday.

Copyright 2009 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.

2009-01-28 16:26:02

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273 comments

Lauradrizzt 08:29:22 AM Feb 01 2009

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I don't mind paying $4.00 for my frappuccino....and I certainly don't mind if it goes to support Tel Aviv. It pains me to see that suddenly people are concerned about "Israeli genocide against Palestinian citizens..." PLEASE! What about Palestinian genocide against Israeli citizens. Israel has been taking crap from Palestine much longer than they should....Give me a coffee...send my donation to the spetsnaz....

Lauradrizzt 08:25:21 AM Feb 01 2009

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I love Starbucks...glad to know my money is going to support Israeli genocide. I would not want it to go to support Palestinian genocide.....you know, that's been going on for Years....I think I will pick up an extra latte if it's supporting Israel.

SWittr1234 01:06:20 AM Jan 31 2009

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Let Starbucks go broke. They are greedy bunch. Instead of lowering there prices in times like these. They live by greed, they go broke by greed.

OHIOPLAYER33 09:34:30 AM Jan 30 2009

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they should have been closed long ago, for supporting Israeli genocide against Palestinian civilians, Starbucks gave 10 %, of the profits to israel, maybe they should just sell coffee, in tel aviv, im glad there going out of business, the people are waking up and divesting from aparthide,

Castletop 08:55:14 AM Jan 30 2009

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Editited and deleted again screw AOL.

Castletop 08:54:18 AM Jan 30 2009

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Why not close all of them?There is no reason that coffee should cost $4.00 and up per cup.For that matter there is no reason it should cost $1.00 per cup.These so called yuppie "trend setters"are the reason that half the stuff we buy today cost so much and then they whine when they lose the "privilage"to have it.Use common sense, coffee is coffee just add cream and sugar!

RedRoses941 07:45:53 AM Jan 30 2009

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Its about time... I was sick of seeing people walking around proudly with a star bucks coffe cup in their hand, like it was the end all be all in life. Theres a corner in Houston where there two of them, they sit across the street from each other. How many star bucks is needed on one street corner?Theres more to life than coffee.

Ricknlynnsog 02:32:23 AM Jan 30 2009

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IT WOULD BE VERY NICE TO GET 12,000.00 DOLLARS FROM THE GOV. BUT WE FAIL TOO THINK TO. IT WILL NOT CREATE NEW JOB IN THE SHORT OR LONG RUN. THINK BEFORE YOU SPEAK. WE NEED JOBS THAT WILL LAST.

Toth4 01:43:26 AM Jan 30 2009

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They came into towns and forced the local small town coffee shops out of business. What goes around comes around. What also gets me is the price they charge you and have they nerve to put out tip cups. Shame on you!

OREDRAG 07:24:40 PM Jan 29 2009

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Isn't it funny how the number of Lobbyist(the most worthless people in America!) increased over 8 fold after Bush got in! WOW! Also your "pork barrel" type of spending went out the roof when Bush got in! LOL! Gee Whiz! Some Repubs forget to admit that, HUH?

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273 comments