- The Washington Times - Wednesday, January 28, 2009

NEW YORK

Starbucks Corp. said nearly 7,000 employees may lose their jobs due to a new round of store closures and cost cuts as it reported Wednesday that its profit dropped 69 percent in its fiscal first quarter.

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.

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.

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 26 cents to $9.39 in electronic after hours trading after rising 5.5 percent during regular trading Wednesda

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