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Seven in state on Starbucks' hit list

They are among the first of 600 to shut down.

July 15, 2008 at 4:39AM
Commercial real estate brokers who work with Starbucks indicate that the company was so determined to meet its growth promises that it relaxed its standards for selecting new store locations. In some cases, Starbucks misjudged how close its stores could be to each other, leading to the decline in same-store sales. It also overextended itself in certain regions, and made site-selection decisions based on demographic projections that proved faulty.
Starbucks announced the first 50 of some 600 closings expected nationwide in coming months, naming seven stores in Minnesota, more than any other except California. (New York Times/The Minnesota Star Tribune)

It's official: This is not friendly territory for Starbucks.

The Seattle-based coffee company has long battled with local coffeehouse operator Caribou Coffee for a share of Minnesota's market. The result? On Monday, Starbucks announced the first 50 of some 600 closings expected nationwide in coming months, naming seven stores in Minnesota, more than any other state except California, which had eight.

The folks at Caribou had no comment. The Minneapolis-based coffee chain has had its own tough year: Sales fell slightly in its most recent quarter, and it, too, is closing weaker stores. Some 28 stores went on the chopping block last year, and a similar number were to close this year, a company spokesperson said in March.

The closings were mostly outside of Caribou's core market, read: Minnesota, but the Starbucks closings were more closely tied to store openings near new housing developments that failed to live up to expectations when the housing market collapsed, said an analyst.

"As the housing market lost strength those locations became less attractive," said David E. Tarantino, an analyst with Robert W. Baird & Co. Inc., an international firm based in Milwaukee.

So are Americans drinking less coffee? Tarantino doesn't think so.

The Minnesota closings -- so far -- include stores in Brooklyn Center, Blaine, Albert Lea, Red Wing, Rochester and two in Coon Rapids.

MATT MCKinney

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