SEATTLE — Starbucks Corp. said Tuesday it will close 600 company-operated stores in the next year, up dramatically from its previous plan for 100 closures, a sign the coffee shop operator is still feeling the pain from the faltering U.S. economy. Starbucks said in a statement that 70 percent of the stores to be closed were opened after the start of 2006. The locations set to close include ones that “were not profi table and not projected to provide acceptable returns in the foreseeable future,” it said. About 12,000 workers will be affected by the closings, which are expected to take place over the next year, according to Valerie O’Neill, a spokeswoman for the company. O’Neill said most of the employees will be moved to nearby stores, but she did not know exactly how many jobs will be lost. The company predicted related charges will add up to $328 million to $348 million, but said that after income tax benefits and other changes, it expects to pay about $100 million. Starbucks also cut the number of company-operated stores it will open in fiscal 2009 in half to fewer than 200. The company did not adjust its plan to open fewer than 400 stores in 2010 and 2011.
Starbucks closing 5 percent of U.S. stores As many as 12,000 Starbucks workers will lose their jobs when the company begins closing 600 U.S. stores this summer. The Seattle coffee company...
By Melissa Allison
Seattle Times business reporter
As many as 12,000 Starbucks workers will lose their jobs when the company begins closing 600 U.S. stores this summer.
The Seattle coffee company is cutting 5 percent of its U.S. locations as part of a wide-ranging effort to boost its bottom line and its stock price. The chain is accelerating international growth.
Most customers whose Starbucks stores close will be a short walk from a caffeine fix, the company said, because many of the unprofitable stores were being cannibalized by nearby Starbucks locations.
The company will try to find jobs for people within Starbucks, but that could be difficult with fewer than 350 new U.S. stores expected to open in the fiscal year beginning Oct. 1.
About 200 of those will be directly operated by Starbucks, with the rest managed by other companies like bookstores and airport concession firms.
As much as 7 percent of Starbucks' work force could be slashed. The company had 172,000 employees worldwide last September.
Starbucks officials said the closures are happening in "all major U.S. markets" between late July and March. Florida and California are among the largest states affected, spokeswoman Valerie O'Neil told Bloomberg News.
There were 2,496 stores in California and 625 in Florida in March. Those two states have been especially hard hit by the real-estate downturn and credit crisis.
"By far, this is the most angst-ridden decision we have made in my more than 25 years with Starbucks," Chief Executive Howard Schultz wrote to employees in a message posted on the company's Web site.
"[B]ut we realize that part of transforming a company is our ability to look forward, while pursuing innovation and reflecting, in many cases, with 20/20 hindsight, on the decisions that we made in the past, both good and bad."
Starbucks originally had planned to close 100 underperforming U.S. stores as part of a turnaround strategy begun when Schultz resumed leading the company in January.
Investors cheered the additional 500 closures, which were announced after regular trading hours Tuesday. After closing down 12 cents to $15.62, shares shot up 72 cents to $16.34 in after-hours trading.
Starbucks has been trading between $28.60 and $15.39 a share during the last year.
Andy Cross, a senior analyst at The Motley Fool in Alexandria, Va., said the higher number of closures was "a little shocking," partly because new Starbucks stores in his area "continue to be packed. But given the environment we're in, nothing really surprises me anymore."
Sharon Zackfia, an analyst with William Blair & Co. in Chicago, said she thinks Starbucks is closing most of its unprofitable stores, except for new locations still ramping up.
"The economy is the big wild card," Zackfia added. "If we're going into another major retrenchment, then anything could happen."
About 70 percent of the stores closing had opened since October 2005. That means Starbucks is shuttering about 10 percent of the 4,081 U.S. stores opened since then.
"They probably made some poor real-estate decisions, and when they opened stores in fiscal 2006, they probably didn't anticipate how tough the economy would be and how the brand would be struggling," said John Owens, an analyst at the research firm Morningstar in Chicago.
The Industrial Workers of the World, which has tried for years to organize Starbucks employees in some cities, said it is "deeply troubled that management's numerous missteps are resulting in more serious hardships for baristas, bussers and shift supervisors."
The union called for Starbucks to disclose which locations are being closed and outline a severance plan.
Starbucks expects profits to drop this year, and its stock is trading about 60 percent below its price in the fall of 2006. It plans to release its third-quarter earnings July 30.
In February, Starbucks rehired former head of store development Arthur Rubinfeld to lead global development.
Last month, it laid off about 100 store-development employees after deciding to throw the brakes on U.S. expansion. It had planned to open fewer than 400 U.S. stores beginning next year, down from 1,788 new U.S. stores last year. That forecast has now been trimmed by 50 more stores.
In February, Starbucks also cut about 600 positions through attrition and layoffs, many of them at its Seattle headquarters.
Starbucks said the store closures will lead to pretax charges of about $328 million to $348 million, including $8 million in severance costs and $120 million to $140 million in lease-termination costs and future lease obligations.
Melissa Allison: 206-464-3312 or mallison@seattletimes.com
Patrons sit Tuesday inside a Starbucks store in downtown Boston. While the company is cutting 5 percent of its U.S. locations, it still is going ahead with expansion plans in foreign markets.
Starbucks to close all stores across America for three hours P-I STAFF AND NEWS SERVICES
Starbucks is closing the doors at its 7,100 stores across America for a brief barista re-education.
CEO Howard Schultz announced the three-hour closure starting at 5:30 p.m. Tuesday to energize 135,000 employees.
He wants baristas to share their passion for making espresso, or as he says, "to pull the perfect shot, steam milk to order and customize their favorite beverage." Schultz says it's part of his refocusing on the coffee customer experience.
Starbucks to close some stores, stop selling breakfast sandwiches By CRAIG HARRIS P-I REPORTER
Starbucks will say goodbye to its breakfast sandwiches, close about 100 underperforming U.S. locations and slow down the number of domestic openings as the once-go-go coffee company retools itself amid a slowing economy.
The changes, announced Wednesday along with modest first-quarter earnings, also include putting more emphasis on overseas expansion. Few stores will be closed in the Pacific Northwest, and employees at the shuttered stores will be transferred to other sites, said Chairman Howard Schultz, who took over as chief executive Jan. 7.
"It's important to understand a new day is here," Schultz said in an interview with the Seattle P-I after the earnings release. "We want to put the customer at the forefront of every decision we make, and we want to exceed their expectations at what we are doing."
Schultz, who replaced fired CEO Jim Donald, said a five-point plan on a "catalyst for change" would be revealed at the company's annual meeting March 19. While still growing the company, Schultz wants to return Starbucks to its roots of intimate coffee houses with unique drinks where baristas connect with customers.
Problems became public nearly one year ago when Schultz sent out a Valentine's Day memo, called "The Commoditization of the Starbucks Experience," lamenting challenges within Starbucks and the "watering down" of the company.
One way to turn back the clock is getting rid of the breakfast sandwiches, even though they bring in significant revenue and were seen as a way to compete for morning sales with McDonald's Corp., which is going head-to-head with Starbucks on coffee sales.
Starbucks employees had long complained the smell of egg-and-cheese sandwiches overpowered the aroma of coffee and cheapened the store experience, and Schultz agreed. He said input from baristas during the past three weeks influenced his decision.
The move to eliminate the sandwiches, which bring in more than $100 million in annual revenue, was "a tough decision, but it's a very easy decision on what is at stake," Schultz said. "For 35 years we have ethically sourced and roasted high-quality coffee by passionate people, and we should not do anything in the stores that is in conflict with that."
Schultz also said China remained the big prize for international growth, but the company also plans to move into Hungary and Poland. In 2009, Starbucks for the first time is planning to open more international stores than U.S. outlets.
"International will offset some of the weakness in the U.S. market," Schultz said.
Starbucks Corp. said profits for the quarter ended Dec. 30 totaled $208.1 million, a 2 percent increase compared with $205 million in net income a year ago. The earnings of 28 cents per share beat by a penny the estimate of Wall Street analysts. Revenue increased 17 percent to $2.77 billion, compared with $2.36 billion for the first quarter of 2007.
Schultz, who took Starbucks public in 1992 and was CEO from 1987 to 2000, is trying to resurrect the company's slumping stock price. Last year, shares dropped 42 percent, and the stock price closed Wednesday at $19.22, a nearly 4 percent drop from the previous day, on the Nasdaq stock market. Shares dropped slightly in after-hours trading, after the company's announcements.
Some analysts said they were disappointed more specific details weren't released.
"It's very difficult to get excited about the story," said Patricia Edwards, a retail analyst at Wentworth, Hauser and Violich in San Francisco. "It's one of those 'trust me' stories, but it (Starbucks) hasn't earned the trust in the last year or two."
Schultz said stores would begin phasing out breakfast sandwiches through the current fiscal year, which ends Sept. 28, and they would be replaced with a healthy alternative.
"Customers have told us they want a healthy breakfast alternative, and no one has responded to that need," Schultz told analysts in a conference call.
Schultz didn't say what the company would sell in place of the sandwiches, which bring in about $35,000 in annual sales per store. But he told the P-I the company's food group would deliver a product that "wouldn't dilute the integrity or romance of coffee."
The company declined to disclose the precise number of stores selling the sandwiches, but it said the sandwiches were in 3,000 to 4,000 stores.
Based on those figures, the company could lose $105 million to $140 million in annual revenue. Schultz said the sandwiches had a small profit margin compared with coffee, but he did not disclose figures.
The company, which during the last quarter opened about eight stores a day, said it would open about five stores a day for the rest of the fiscal year.
Despite the slowdown, Starbucks still is the largest gourmet coffee chain in the world with 15,756 stores in 43 countries, including the U.S.
In November, the company started feeling a pinch from a slowing economy, and it lowered its estimated 2008 worldwide openings by 100 stores to 2,500 net new stores. That figure was lowered again Wednesday to 2,150 stores. The number of projected U.S. store openings will drop from 1,600 to 1,175, while the number of foreign stores will increase from 900 to 975.
In 2009, the company for the first time is projecting to open more stores overseas than in the U.S., which will have fewer than 1,000 new stores.
P-I reporter Craig Harris can be reached at 206-448-8138 or craigharris@seattlepi.com.
Starbucks isn't telling yet which shops will close
By JAMIE GUMBRECHT The Atlanta Journal-Constitution
Published on: 07/02/08
Let us be frank.
We don't know which 600 Starbucks stores will close, or how many in the Atlanta area. The Seattle-based company has been mum on its hit list since the closing announcement this week. It wants to inform its employees, or "partners," first, a company statement said, adding that many will be placed in jobs at other stores.
could be shuttered: Be a bean counter.
"Not panicked," says latte lover Olivia Seney, who enjoyed her paper cup of caffeine outside the Starbucks at Peachtree and 14 streets Wednesday. "There's another one two blocks that way. And that way. And that way.
"Maybe," she added, "this will give local shops a chance."
Starbucks' closings affect only company-operated stores. Based on a February 2008 count, that leaves about 6,487 stores in the United States. And don't forget there are 4,081 licensed stores, like the ones found in Barnes & Noble, Target and Kroger. They offer the same products but operate through a licensing agreement. These are not in jeopardy.
Starbucks says that it will close underperforming stores and that 70 percent of the 600 stores had opened since 2006. The Atlanta area has about 130 company-owned stores, but a list of opening dates wasn't made available.
Closings will start mid-July and go through March 2009. Stores will be notified about 30 days in advance. Customers who must have a Starbucks fix can find additional locations at http://www.starbucks.com.
Some local Starbucks are closing their doorsComments 0 | Recommend 0 July 3, 2008 - 3:12PM CBS 6 News Starbucks announced on July 1st that it will close the doors on 600 of it's stores nationwide.
In the Capital Region, sources tell us that at least one store will close, though no official date has been released.
The location on Watt Street in Schenectady, CBS 6 has confirmed with sources, will be one of the closing stores.
Starbucks says that although some of the part-time and full-time positions will be eliminated, many of its current employees will be re-assigned to an alternate location.
Is your local Starbucks closing? We want to know. Send an email to news@cbs6albany.com with the location.
Who the heck can afford their coffee anyways? How about brewing your own at home in the morning and pouring it into a thermo cup and bring it to work with you? Now how hard can that be? Really!
When the INSANE are running the ASYLUM In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. -- Friedrich Nietzsche
“How fortunate for those in power that people never think.” Adolph Hitler
When the INSANE are running the ASYLUM In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. -- Friedrich Nietzsche
“How fortunate for those in power that people never think.” Adolph Hitler
Huh? I haven't even responded to this thread ... unless it was my alter ego?
opps....Sorry....I meant Kevin!
When the INSANE are running the ASYLUM In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. -- Friedrich Nietzsche
“How fortunate for those in power that people never think.” Adolph Hitler
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