Starbucks, the world’s largest coffee-shop operator, said second-quarter profit fell 77 per cent and announced it would open fewer stores than planned this year as consumer spending declines.
Net income dropped to $25 million, or 3 cents a share, in the three months ended March 29, the Seattle-based company said today in a statement. Starbucks will add 20 locations this year, down from the 95 it predicted in January, as it seeks to cut $500 million in costs through September.
Chief executive Howard Schultz is fighting the perception that Starbucks’s espresso-based coffees are a pricey luxury as consumers cut store visits amid the longest recession since the postwar era.
The coffee seller is facing competition from McDonald’s and Dunkin’ Donuts, both of which sell cheaper lattes and cappuccinos.
The chain booked $152.1 million in asset impairment, lease termination and severance charges. Excluding restructuring costs, the company earned 16 cents a share, topping analysts’ average estimate for profit of 15 cents.
Sales fell 7.6 per cent to $2.33 billion.
Starbucks advanced 6 cents to $13.75 at 5:46 p.m. after the close of Nasdaq Stock Market trading. Before the earnings release, the shares rose 19 cents to $13.69. The stock has lost 45 per cent this year.
The company said it’s making “good progress” cutting costs, and saved $120 million in the second quarter.
The coffee seller reaffirmed its forecast for cash from operations of more than $1 billion this year.
The company is closing 300 stores this year, in addition to the 600 closings it announced last year.
Bloomberg