Starbucks sheds jobs and closes stores
Starbucks Corp plans to slash nearly 7,000 more jobs during a new round of store closures and other cuts, the company said as it reported that its profit dropped by more than two thirds in its fiscal first quarter.
The gourmet coffee chain plans to close 300 underperforming stores around the world – including 200 in the US – by the end of the fiscal year in addition to the 600 US stores it began closing this summer.
The new store closures could result in the loss of 6,000 jobs, but the company said it will try to offer employees transfers to other nearby locations.
Starbucks also plans to lay off about 700 non-store employees and has reduced the number of new stores it plans to open.
The cuts and changes will result in about $500m (€382.7m) in savings in fiscal 2009, the company said.
With the recession now well into its second year, consumers concerned more about the possibility of losing their jobs than maintaining a $4 (€3) daily latte habit are increasingly forgoing the company’s brew.
Starbucks also has had to make room for a new lower-priced competitor in the specialty-coffee industry since McDonald’s Corp introduced espresso-based coffee drinks in its US stores.
In a conference call with investors, chief executive Howard Schultz implored Wall Street to focus on the company’s attempts to bolster its business for the long term instead of worrying about its quarterly profit and sales results.
“We believe all of the work we are doing will pay off in the long run,” Mr Schultz said. “We feel good about the progress we are making.”
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,” Mr Russo said. He said the company will have to “claw their way back”.
