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Starbucks plans to cut nearly 7,000 jobs

The coffee shop chain will close 300 stores in addition to the 600 outlets it began shuttering last summer.

Last update: January 28, 2009 - 8:28 PM

NEW YORK - Starbucks Corp. plans to slash nearly 7,000 more jobs during another round of store closures and other cuts, the company said as it reported Wednesday 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 United States -- by the end of the fiscal year in addition to 600 U.S. stores that it began closing last summer.

The new 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 and has reduced by 160 the number of new stores it plans to open. The cuts and changes will result in about $500 million in savings in fiscal 2009, the company said.

In a related matter Tuesday, Starbucks said it will stop continuously brewing decaffeinated coffee after noon as part of a drive to waste less and save money. The company, which last year started brewing fresh pots of coffee every 30 minutes, will have the caffeine-free version available upon request. It takes about four minutes for a fresh cup to brew, spokeswoman Bridget Baker said.

During a conference call with investors Wednesday, Chief Executive Howard Schultz implored Wall Street to focus on the company's attempts to bolster its business for the long term rather than worrying about its quarterly profit and sales results.

Wall Street had largely expected Starbucks to report dismal performance for the quarter, which ended Dec. 28, because it 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.

Excluding charges from closing the 600 U.S. stores and 61 stores in Australia, the company's profit was still 2 cents per share shy of estimates, which typically exclude special items.

Revenue fell to $2.62 billion, from $2.77 billion, while analysts had predicted revenue of $2.70 billion.

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