11th Nov 2008 - 00:00
Abstract
Global coffee company Starbucks has seen over $105 million wiped off its fourth quarter profits as the price of closing underperforming stores and restructuring cost the business dearly.
Net profits for the 13 weeks ending 28th September were recorded as $5.4 million and the same period last year saw profits of over $158 million. Many will see this as further evidence the coffee chain is losing its grip on the market but Starbucks said in a statement that they remain the most resilient brand within the premium coffee market. CEO, Howard Schultz responded to the results by looking forward to next year: "As we head into the holiday season and 2009, consumers are looking for value and we've been pleased with the steady progress of our Starbucks Rewards program and the enthusiastic reception to the Starbucks Gold Card. I am optimistic we are well positioned to weather this challenging economic environment." The $105 million relates to the cost of closing over 600 stores across the US and 61 company-operated stores in Australia. Around 1,000 people lost their jobs. Business in the US still accounted for 75% of the total $2.5 billion net revenue, increasing by 3% compared with the same time in 2007. Starbucks said it plans to open approximately 700 new stores and two-thirds of these will be licensed, which sees the coffee company join forces with hotels, holiday parks, universities and even hospitals. The company said its approach to business in the UK and Europe remained cautious.