Starbucks boosts planned store closures to 600
Last Updated: Wednesday, July 2, 2008 | 11:11 AM ET
The Associated Press
A patron sits in a Starbucks in downtown Boston on Tuesday. (Elise Amendola/Associated Press)Starbucks Corp. said Tuesday it will close 600 company-operated stores in the next year, up dramatically from its previous plan for 100 closures, a sign the coffee shop operator continues to struggle with the faltering U.S. economy and its own rapid expansion.
Seventy per cent of the stores slated for closure had opened after the start of 2006, the company said in a statement.
To put it another way, Starbucks is closing 19 per cent of all U.S. company-operated stores that opened in the last two years, Chief Financial Officer Pete Bocian said during a conference call.
About 12,000 workers, or seven per cent of Starbucks' global work force, will be affected by the closings, which are expected to take place between late July and the middle of 2009, spokeswoman Valerie O'Neil said.
O'Neil said most employees will be moved to nearby stores, but she didn't know exactly how many jobs will be lost. Starbucks estimated $8 million US in severance costs.
'Unfortunately, they made some poor choices to expand at the worst possible time. And they're paying for it now. Simple as that.'
--ducmancometh
In total, the company forecast up to $348 million US in charges related to the closures, with $200 million to be booked in the fiscal third quarter ended June 30. Starbucks reports third-quarter results at the end of July.
The 500 additional stores set to be closed had been on an internal watch list for some time. They were not profitable, not expected to be profitable in the foreseeable future, and the "vast majority" had been opened near an existing company-operated Starbucks, Bocian said.
Starbucks still plans to open new stores in fiscal 2009, but on Tuesday it cut that number in half to fewer than 200. The company did not adjust its plan to open fewer than 400 stores in 2010 and 2011.
At the end of March, there were 16,226 Starbucks stores around the world. The company operates 7,257 of those stores in the U.S. and 1,867 abroad. The remaining 7,102 locations are run by partners who license the Starbucks brand.
