Advertising

The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds | seattletimes.com

Local News


Our network sites seattletimes.com | Advanced

Originally published Wednesday, April 29, 2009 at 3:35 PM

Comments (0)     E-mail E-mail article      Print Print      Share Share

Starbucks 2Q profit down 77 percent on charges

Consumers continued buying fewer lattes and coffees at Starbucks in its second quarter and restructuring charges led to a 77 percent in net income, but the drop in sales was something of an improvement.

AP Business Writer

NEW YORK —

Consumers continued buying fewer lattes and coffees at Starbucks in its second quarter and restructuring charges led to a 77 percent in net income, but the drop in sales was something of an improvement.

Starbucks Corp. - hurt in recent quarters by the perception that its drinks are too pricey - said Wednesday that sales at established locations fell 8 percent both worldwide and in the U.S. the first three months of 2009 compared with a year earlier.

In the last three months of last year, Starbucks' global same-store sales fell 9 percent and U.S. same-store sales declined 10 percent.

Chief Executive Howard Schultz said during a conference call with investors Wednesday that it was too early to label the slight improvement a trend.

The company said it will change some prices in some markets to reflect its consumer research. Schultz did not offer specifics but said prices on some popular drinks, like lattes, will fall in some places while prices of larger or more complicated drinks could rise.

Schultz said the company will start a multimedia marketing campaign this year showcasing its value and quality, and it will offer customers more value through promotions and its loyalty cards.

"Consumers want to feel good about every hard-earned dollar they spend," he said.

For the quarter that ended March 29, Seattle-based Starbucks said its net income fell to $25 million, or 3 cents per share, from $108.7 million, or 15 cents per share a year earlier.

Excluding costs related to closing 123 U.S. stores during the quarter, Starbucks earned 16 cents per share. Analysts polled by Thomson Reuters expected it to earn 15 cents per share.

The store closures during the period are part of a plan to shut underperforming stores and shave costs companywide. Since January 2008, the chain has announced a total of more than 900 store closures and said it plans to cut as many as 6,700 jobs.

In all, 507 U.S. stores and 64 international stores have been closed so far.

The gourmet coffee retailer says quarterly revenue fell 8 percent to $2.33 billion. Analysts predicted revenue of $2.36 billion.

advertising

Edward Jones analyst Jack Russo was surprised same-store sales did not improve more during the period, although he noted January and February were difficult months for consumers.

"We were surprised we didn't see a bit more bump on the same-store sales," he said.

Same-store sales is considered a key retail metric because it excludes performance of stores that opened or closed during the year.

Consumers' cuts on small luxuries have hurt Starbucks sales.

At the same time, the perception that its drinks are too pricey has helped McDonald's Corp. and others make inroads in the specialty coffee market. McDonald's, which has reported big increases in same-store sales in recent quarters, is rolling out espresso-based coffee drinks in its 14,000 U.S. locations.

Schultz said, though, that the addition of such a big player in the sector has not significantly affected Starbucks.

"Speculation that Starbucks is losing retail market share to competitors has been grossly exaggerated," he said. "Our customers are not trading down," referring to the movement of consumers from higher-priced items to lower-priced ones.

Still, Starbucks has introduced a line of instant coffee, called Via, which sells for less than $1 per cup, and it has created two "breakfast pairings" that offered consumers a lower price if they buy a latte or cup of coffee along with a food item.

Schultz said the company has seen "heavy demand" for Via and will soon introduce more flavors. Via now comes in two varieties - Italian Roast and Colombia.

Starbucks said it delivered $120 million in cost savings during the quarter, exceeding its goal of $100 million. The company has targeted $500 million in cost savings for the full fiscal year.

It plans to add a net of 20 new stores to its global store base. Its shares rose 2 cents to $13.71 in after-hours trading. During regular trading, they rose 19 cents to close at $13.69.

Copyright © 2009 The Seattle Times Company

More Local News headlines...

E-mail E-mail article      Print Print      Share Share

Comments
No comments have been posted to this article.


Get home delivery today!

More Local News

UPDATE - 09:46 AM
Exxon Mobil wins ruling in Alaska oil spill case

NEW - 7:51 AM
Longview man says he was tortured with hot knife

Longview man says he was tortured with hot knife

Longview mill spills bleach into Columbia River

NEW - 8:00 AM
More extensive TSA searches in Sea-Tac Airport rattle some travelers

Advertising

Video

Marketplace

What's in a wheel size?new
Dear Tom and Ray: I drive Lincoln Navigators. I like as good a ride as possible for this size vehicle. If I remember correctly, the one I bought in 20...
Post a comment

Advertising