Starbucks closing 5 percent of U.S. stores

[JamieC]

Business & Technology | Starbucks closing 5 percent of U.S. stores | Seattle Times Newspaper

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.

"But 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.

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.
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* Starbucks crashed & burned far before the economy as a whole tanked...they opened entirely too many stores in such a short period of time. There are stores practically within 15 feet of each other across the nation. A recipe for DISASTER...in my opinion and that java in a cup is far too expensive to begin with*.

[afrocentric]

heres an excerpt from someone's post that i agree with.........

Call me boring. Call me traditional. But I like a regular cup of coffee (which Starbucks does sell). Does that Organic Sumatra-Peru Blend taste great? Probably. Is it worth four bucks? Maybe once in a while.

And while the puns are potentially endless on this post (Starbuck-less. Falling Starbucks. Better latte, then never), what's not funny is the fallout from the current economic woes.

Suddenly, there's competition for those barely above minimum wage fast food, retail, and low-skill factory jobs. And the people competing for those jobs may be folks whose white-collar job is gone, and they need something - anything - to get by.

so my thing is this.....why spend $6 on coffee when you can go to 7 eleven and pay 80 cents. it never made sense to me. but hey, it ain't my money. that's why i make my own coffee in the grey plug in old-fashion coffee maker, you know the one made back in the day, the one without coffee filter....nothing like coffee at 5:00 in the morning.

[MrAtlanta]

It's good to see that the public has come to it's senses. I never understood why anyone would pay almost $10 for ONE cup of coffee. Unreal.

But then again, I'm not a coffee drinker at all, what do I know?

[JamieC]

Originally Posted by afrocentric

heres an excerpt from someone's post that i agree with.........



so my thing is this.....why spend $6 on coffee when you can go to 7 eleven and pay 80 cents. it never made sense to me. but hey, it ain't my money. that's why i make my own coffee in the grey plug in old-fashion coffee maker, you know the one made back in the day, the one without coffee filter....nothing like coffee at 5:00 in the morning.

Originally Posted by MrAtlanta

It's good to see that the public has come to it's senses. I never understood why anyone would pay almost $10 for ONE cup of coffee. Unreal.

But then again, I'm not a coffee drinker at all, what do I know?

I agree afrocentric if they want coffee that bad they should go to Smart & Final or Food For Less. And MrAtlanta I'm not a coffee drinker either that's why I stick with Pepsi Max. At least with $10.00 in my pocket I can get a lil gas to make it to the grocery store..lol

[DBlack]

Bottom line is a Starbucks latte is a gallon of gas. Pretty easy to figure out.

[DBlack]

Originally Posted by MrAtlanta

It's good to see that the public has come to it's senses. I never understood why anyone would pay almost $10 for ONE cup of coffee. Unreal.

But then again, I'm not a coffee drinker at all, what do I know?

Always making up shyd! What Starbucks you go to? It's about 4 bucks, 5 bucks tops, but still too much dayum money for some coffee.

[DBlack]

Originally Posted by JamieC

I agree afrocentric if they want coffee that bad they should go to Smart & Final or Food For Less.

That's a helluva name for a store...Smart & Final. Does that mean you can't return anything if something is wrong with it, lol?!

[JamieC]

Originally Posted by DBlack

That's a helluva name for a store...Smart & Final. Does that mean you can't return anything if something is wrong with it, lol?!

D. you're nuts.

[MrAtlanta]

Originally Posted by DBlack

Always making up shyd! What Starbucks you go to? It's about 4 bucks, 5 bucks tops, but still too much dayum money for some coffee.

Yeah, I did say almost $10 for a cup of coffee, didn't I. You do know what the word almost means don't you?

At many of the Starbucks here in town, you're going to pay roughly $ 7.00, tax included, for a large container of their "special blend" coffee. By the time you give the cashier a $10 bill, you might as well let her keep the damn change. What the hell are you going to do with roughly $3.00 in change with the rate of inflation being as high as it is? Buy gas? Not anymore.

BTW, I make this statement under the assumption that even you can do simple math.

[afrocentric]

but ahem,.....i gotta laugh at mr atlanta! hahahaha