Date registered: Jul 2006
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Starbucks might need a bailout...just kidding..
Starbucks sees tough times ahead
By Jim Jelter, MarketWatch
Last update: 8:31 p.m. EST Nov. 24, 2008Comments: 1SAN FRANCISCO (MarketWatch) -- Starbucks issued yet another warning to shareholders Monday, letting them know just how tough the business of selling high-end coffee has become in a world headed toward what it said looks to be a severe economic recession.
Layoffs, tighter consumer credit, higher food prices and a growing number of home foreclosures -- especially in its key California and Florida markets -- have carved deeply into consumer confidence, the Seattle-based company said in a late-day filing with the Securities and Exchange Commission.
"As a retailer that is dependent upon consumer discretionary spending, the Company expects to face an extremely challenging fiscal 2009 because of these economic conditions," it said.
For fiscal 2009, which began Sept. 29, Starbucks said it expects to see a drop in sales at coffee shops that it opened at least a year ago, extending a trend already evident in 2008.
The company also warned another round of restructuring might be in the cards to stem any further decline in its own financial performance.
Starbucks predicted 2009 earnings will be hit by lease termination and severance costs at its U.S. and Australian stores totaling up to 12 cents a share. It also estimated that combined U.S. and Australian store closures and job cuts will add up to $210 million, or 17-18 cents a share, to its 2009 pre-tax operating income.
The company said it expects to end the year with 20 fewer stores in the U.S. while adding another 700 overseas, two-thirds of which will likely be operating under license. Starbucks currently operates and licenses about 16,680 stores worldwide.
On Nov. 10, Starbucks (SBUX:Starbucks Corp
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SBUX 8.40, +0.57, +7.3%) reported a fourth-quarter net profit of one cent a share. Excluding one-time items, most of them linked to restructuring costs, the company's per-share profit was 10 cents, compared with 21 cents a share a year earlier. See full story.
At the time, Chief Executive Officer Howard Schultz said October store traffic had improved. But further deterioration of the economy and mounting financial anxiety among consumers has made it extremely difficult to sustain the trend.
Starbucks shares closed Monday at $8.45 but fell 42 cents to $8.03 in after-hours trade. The stock is down about 63% over the past 12 months.