News
Starbucks to cut 6,700 jobs, close 300 units
January 28, 2009
SEATTLE — Starbucks Corp. has reported financial results for its first quarter ended Dec. 28, 2008, and announced additional cost savings initiatives for fiscal 2009 that includes the closing of 300 stores worldwide and the reduction of at least 6,700 store positions. The company also said it will stop brewing decaf coffee after noon in an after to cut costs by about $400 million.
For the quarter, consolidated comparable-store sales decreased nine percent. U.S. comparable stores sales declined 10 percent, due to lower volume of transactions and average value per transaction. Comps for the company's international operations decreased three percent, primarily driven by further softening of traffic in the UK and Canadian markets.
U.S. total net revenues were $2 billion, a decline of $121 million, or six percent, due to decreased revenues from company-operated retail stores. International total net revenues were $495.7 million for the 13-week period, down $45.1 million, or eight percent, compared with the same period last year. Consolidated net revenues were $2.6 billion for the first quarter of fiscal 2009, a decrease of six percent, compared with $2.8 billion for the first quarter of 2008.
Starbucks reported net income of $64.3 million and non-GAAP net income of $113.1 million, compared with reported net income of $208.1 million for the same period a year ago. Earnings per share for the quarter was $0.09 and non-GAAP EPS was 15 cents, compared with reported EPS of 28 cents in the first quarter of fiscal 2008.
"In the midst of the weakening global consumer environment, Starbucks is following a well-developed plan to strengthen our business through more efficient operations and by preserving the fundamental strengths and values of our brand," said Howard Schultz, chairman, president and CEO. "We remain focused on driving the discipline and rigor necessary to create long-term shareholder value, and we are taking aggressive steps to excite customers by providing relevant value and innovation, even during this challenging time."
Restructuring charges of $75.5 million for the quarter were primarily composed of lease exit and other costs associated with the closure of 179 U.S. company-operated stores during the quarter. Since the July 2008 announcement of plans to close approximately 600 stores, a total of 384 of these stores have been closed. The remaining store closures in the initial group are expected to occur by the end of fiscal 2009.
Cost-savings cuts
Starbucks also announced the following actions aimed at aligning its business with the current operating environment:
- The company plans to close approximately 300 additional underperforming company-operated stores, approximately 200 in the U.S. and the remainder in international markets. These stores are in addition to the estimated 600 U.S. and 61 Australian market store closures announced in July 2008.
- Starbucks has further reduced its fiscal 2009 new company-operated store openings target in the U.S. to 140 new stores from its previous target of 200 new stores. Internationally, the company now plans to open 170 new stores in fiscal 2009, down from the company's previous expectation to open 270 new stores. The company has also lowered its net new licensed store opening target, and is now expecting to open approximately 125 net new licensed stores in the U.S. and approximately 360 net new licensed stores internationally.
- The company anticipates that the store closures, combined with reduced store openings for fiscal 2009 and other labor efficiency initiatives, could result in a reduction of as many as 6,000 store positions over the course of fiscal 2009.
- As part of the effort to align the company's non-retail support organization with the current operating environment, Starbucks plans a global workforce reduction that will result in approximately 700 non-store partners being separated from the company in the U.S. and internationally, with about half at the company's support center in Seattle.
Costs associated with severance related to the reductions in workforce are currently estimated to be up to $30 million, and Starbucks anticipates that the majority of these charges will be recorded in the second fiscal quarter of 2009.
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