NEW YORK - Starbucks Corp. said Wednesday its fiscal first quarter profit and sales below Wall Street forecasts. The high-end coffee chain also announced cuts of 6,700 new jobs as a weak economy weighed on sales.
For the three months ended December 28, based in Seattle, Starbucks reported net income of $ 64.3 million, or 9 cents per share, compared with $ 208 million, or 28 cents per share, a year ago.Excluding certain charges, including the $ 75.5 million pre-tax charges related to store closings, the company said it earned 15 cents per share. Analysts were expecting 17 cents. Sales in the quarter fell 6% to $ 2.6 billion from U.S. $ 2.8 million a year ago. Analysts expected $ 2.69 billion.
Same-store sales, or sales at locations open more than a year, fell by 9% worldwide and 10% in the U.S.
Starbucks said the store closures and the reduction of operations would result in a loss of up to 700 by 6000 and lower non-store jobs. The company expects to close 300 stores below.
Together with the previously announced cost-saving measures, Starbucks expects the job cuts and closures to help save $ 500 million over the next year.
"These decisions are very difficult but necessary to ensure that we have the appropriate infrastructure and cost structure to maintain profitability in the future," Troy Alstead, Starbucks chief financial officer, told analysts in a conference call.
Starbucks would not be a financial forecast for the coming quarters, blaming the current economic uncertainty. However, the company said it plans to open 95 new stores next year, which is 100 less than it was opened in 2008.
"We are moving quickly to adapt our business to the realities of the current environment," said Howard Schultz, Starbucks' chairman and chief executive.
For his part, Schultz will have his salary reduced to under $ 10,000 this year from $ 1.2 million last year. And the company says it will retain only a business plan.
Schultz told analysts in a conference call that Starbucks' profits remain under pressure until the economy begins to recover. " However, he added that "emerge leaner, stronger and better positioned thanks to the company plans cost savings.
"The neighborhood is not too surprising," said Sharon Zackfia, an analyst who covers Starbucks for William Blair & Company. "However, it is not a pretty picture," he added.
On the side, Zackfia said that the additional cost savings plans would begin to show results in the short term.
"Starbucks is a retailer," he said. And the cost reduction is the only way to successfully navigate this economy. "
In addition to managing costs, Starbucks said it plans to offer customers "real value" several "couples breakfast at attractive price points," due out in March. But the company refused to explain what the pairings are.
Starbucks (SBUX, Fortune 500), which specializes in higher-end specialty coffee, has struggled with declining sales as a deepening recession has pushed consumers toward cheaper retailers like McDonald's coffee ( MCD, Fortune 500) and Dunkin 'Donuts.
Schultz said the company plans to start "reversing the misconceptions about our ability to pay."
At the same time, the company remains committed to defending its "brand experience-oriented" while offering "significant value" to customers, said Schultz.