SEATTLE — Starbucks Corp., the Seattle-based company that turned coffee into a high-priced daily indulgence, announced Wednesday that it will eliminate about 6,700 jobs because of the difficult economy.
The company reported that its profit dropped 69 percent in its fiscal first quarter. Starbucks said it will close 300 underperforming stores in addition to the 600 it already planned to close in the United States. The company had planned to open 200 new stores in the United States but said it will scale back to 140.
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 nonstore employees.
The cuts and changes will result in about $500 million 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 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 U.S. stores.
On 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,” 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,” 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 69 percent from $208.1 million, or 28 cents per share a year earlier.
Starbucks also said Schultz asked the company’s board of directors to cut his salary last week. The board agreed to pay Schultz just $10,000 in base salary for fiscal 2009, including health insurance and other benefits.
Schultz, whose salary was $1.2 million in 2008, still could take home millions 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.
Starbucks scaled back its overseas outlook, too. The company said it plans to open only 170 new stores outside the U.S., down from the 270 it had planned.
Starbucks added it would sell one of its two corporate planes and will reach out to landlords to try to negotiate lower rents for its stores.
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