WORLD> America
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WORLD> America
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Starbucks to cut up to 12,000 jobs, close 600 stores
(Agencies)
Updated: 2008-07-02 09:35 Those critics complained that the company had overbuilt in the United States -- particularly in major urban areas like Manhattan, where it is not unusual to see several Starbucks in a single city block. The Seattle-based company was also an aggressive builder in California and Florida. Those states experienced red-hot growth during the housing boom and have been hardest hit by the US housing downturn. Oppenheimer & Co analyst Matt DiFrisco said he was "very encouraged" by the company's announcement. "It helps remove some of the cannibalization that the company brought on itself," said DiFrisco, who also has an "outperform" rating on Starbucks shares. Starbucks said the closures are spread across all major US markets and that 70 percent of the targeted stores have been open since the beginning of fiscal 2006. Total pretax charges associated with the planned US company-operated store closures, including costs associated with severance, are estimated to be in the range of $328 million to $348 million. Starbucks also trimmed planned openings for its upcoming fiscal year ended September 2009. It now plans to open fewer than 200 new US company-operated stores, down from 250 previously. The stock rose to $16.35 in after hours trading, up 4.7 percent from its close of $15.62 on Nasdaq. While investors cheered the announcement, analysts were quick to point out that a further worsening of the US economy or steep increases in gas and food prices would put additional pressure on the company known for its premium-priced coffee drinks, such as $3 to $4 lattes. "Consumers are not in the spending mood," said Bob Goldin, executive vice president at restaurant consulting firm Technomic. |
