Starbucks, will cut 6,700 jobs and close 300 more stores after reporting first-quarter profit that fell more than analysts estimated.
The coffee retailer plans to close 200 café's in the US and 100 overseas, in addition to the 600 Starbucks said it would close last year. The workforce reduction will eliminate 6,000 cafe positions and 700 corporate jobs, the Seattle-based chain said today in a statement.
Chief Executive Officer Howard Schultz warned in December that Starbucks' profit would be less than analysts' estimates at the time as sales in established stores worsened in November. Customers pinched by job losses and falling home prices are cutting back on premium coffee.
The firings and closings announced today further accelerate Schultz's plan to trim costs.
Schultz also asked the board to cut his annual base pay to less than $10,000, or the minimum required to maintain benefits for him and his family, spokeswoman Deb Trevino said today in a telephone interview.
His base pay was about $1.2 million in 2008. Starbucks is also selling a corporate jet, bringing the fleet to one plane following a similar sale late last year.
"The only grown-up attitude and thing for them to do in this environment" is to adjust to the declining revenue, Sharon Zackfia, an analyst with William Blair & Co in Chicago, said today in a Bloomberg Television interview.
"You have to give this company credit for coming up with ways to bolster their margin even though same-store sales are down."
The additional measures increase the company's plan to trim costs by $100 million this year, to at least $500 million, Starbucks said. Starbucks may save more next year as the store closings take effect, chief financial officer Troy Alstead said on a conference call.
Sales at US stores open at least 13 months dropped 10 per cent in the first quarter. The company had a total of 16,875 stores, including franchised locations, as of December 28th.
Bloomberg