Starbucks Announces It Will Close 600 Stores
http://www.nytimes.com/2008/07/02/business/02sbux.html?th&emc=th
http://topics.nytimes.com/top/news/business/companies/starbucks_corporat...
By MICHAEL J. de la MERCED
Published: July 2, 2008
In a harsher economic climate, Starbucks’s green-and-white mermaid logo is about to become a little less ubiquitous.
The company, the world’s largest coffee chain, said Tuesday that it would close 600 stores in the United States beginning this year. It will lay off more than 12,000 employees in the process, the most in its history.
The plan builds on an earlier decision to close 100 stores, which are included in Tuesday’s numbers. Starbucks is retrenching in an effort to recapture the once-mighty growth it built upon venti soy lattes.
A cavalcade of economic troubles, from imploding housing markets to rising gas prices, has pinched consumers, hurting not just Starbucks but nearly all retailers. The chain is struggling to attract customers for the afternoon frappuccinos they once bought eagerly, said Sharon Zackfia, an analyst at William Blair & Company.
“I don’t think it’s overly surprising,” she said of the announcement. “These stores were in aggregate unprofitable.”
Shares in Starbucks rose as high as $16.53 in after-hours trading Tuesday after closing at $15.62. They have fallen about 24 percent this year.
For years, Starbucks was known for aggressive growth, opening some stores only a few city blocks away from others. As of Sept. 30, the company operated 6,793 outlets in the United States, according to a regulatory filing. About 70 percent of the stores that will be closed have been open for fewer than three years.
As financial stumbles took a toll on the stock price, Starbucks’s former chairman and chief executive, Howard Schultz, reclaimed the company’s reins in January. Starbucks said in May that its second-quarter profit fell 28 percent, to $108.7 million, in what was its weakest quarter as a public company.
In addition to the cutbacks, Starbucks said it would open fewer than 200 new stores in the United States next fiscal year, down from the 250 initially planned.
Starbucks said that it could take up to $348 million in charges and write-offs related to the closings, including costs tied to lease terminations and severance payments.
Starbucks began scrutinizing its stores’ performance this year, Peter J. Bocian, the company’s chief financial officer, said Tuesday in a conference call. Though he said there were no additional plans to close stores on such a broad scale, Mr. Bocian said that the company would continue to examine its options.
“We believe we’ve improved the profit potential of the U.S. store portfolio,” Mr. Bocian said. “We continue to take action in areas we can continue to control.”
Mr. Bocian said Starbucks would continue to focus on expanding internationally.
It is too early to tell if Starbucks’s other efforts to rejuvenate its business, including introducing new products like fruit smoothies, are working, said Ms. Zackfia, the analyst. The company has been successful with its introduction of Pike Place, a mild drip-blend coffee.
French Connection
shopping42have read all about it-so sad-
1so...can they lower their prices????
btw i went to dunkin donuts and it's a dollar for a doughnut are they kidding me?
2Money is extremely tight and the prices of items just keep on rising; so I'm not surprised Starbucks is taking a loss however it's sad that our country is in such a mess.
3600 stores out of nearly 6800 only represents slightly more than 8% of their total stores, so I hardly consider this an indication of major problems brewing for Starbucks. As I understand it, the stores being closed are in locations that were not profitable from the get-go. Sounds like a correction in their bigger picture rather than an indication of poor overall sales.
4ugh, i was so upset when i found this out~!!
i'm from boston, and on newbury street there are four starbucks, it is a little bit excessive but i hope at least one of them will remain open! i enjoy having a starbucks before/after i go shopping with my friends!
5Starbucks..heh. I don't go, and have not in years. When I lived in Edinburgh I made a point to support local, smaller chains or one-off coffeehouses. The coffee was just as good (often better), and I felt I was keeping money in the community instead of being ferreted off to somewhere else.
On the otherhand, they helped the idea of coffeehouses get trendy in the first place, which is a positive. I just think a lot of people like me get the feeling they "sold their soul" somewhere along the line and Starbucks stopped being cool, and started being seen as the corporate behemoth it became.
They grew too big, too fast, and got too greedy. Its not the end of the world. This will teach them to be a bit more sensible about their business plans, while allowing smaller businesses a breather from their mindless expansion.
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