New York - Fewer US customers and venti-sized costs for closing poorly performing stores led to lower sales and profit in the fourth quarter at Starbucks Corp, the company said Monday.
Seattle-based Starbucks said profit fell 97% to $5.4m, or a penny a share, from $158.5m, or 21c per share, a year earlier. The coffee retailer earned 10c per share when the costs from closing about 600 stores in the US and 61 locations in Australia are excluded.
Analysts expected profit of 13c per share, according to a poll by Thomson Reuters.
Starbucks began shutting the US and Australian stores this summer as part of a campaign to reverse slowing sales and falling profits at the company. That turnaround began at the start of the year when former chief executive Howard Schultz took back the reins of the company to again fill the CEO and chairperson posts.
Besides closing the stores, Starbucks has cut more than 1 000 positions - many of which were unfilled - and introduced a slew of new products, including Vivanno smoothie drinks and breakfast pastries.
The company also replaced ageing espresso makers and launched new single-cup Clover brewing machines in some markets.
Trying to get back on track
But all the changes did little to boost sales in the fourth quarter, particularly in the US, where the turmoil in the economy during the summer months took a gulp out of consumer spending.
Revenue rose 3% to $2.52bn from $2.44bn. Analysts expected sales of $2.58bn. Same-store sales, or sales at locations open at least a year, dropped 8% in the US as fewer customers came into the stores. Those that did also spent less, the company said. Same-store sales were flat overseas.
Despite the sales slowdown, Schultz said the company was doing what it needed to get back on track.
"We appear to be more resilient than many other premium brands," Schultz said in a statement. "And while we cannot call isolated signs of improving sales a trend, we are encouraged by our ability to drive increased traffic at a relatively low cost, as we did on Election Day" when the company offered customers a free "tall" drip coffee.
For the 2008 fiscal year, Starbucks earned $315.5m, or 43c per share, down from $672.6m, or 87c per share, in 2007. Revenue rose to $10.38bn from $9.41bn.
Starbucks said it expects 2009 profit excluding one-time costs between 71c and 90c per share depending on how steeply same-store sales decline during the year. Analysts predict profit of 87c per share for the year.
The company also said it will open about 700 net new stores overseas during the fiscal 2009 year. In the US, the company said it will close about 225 stores and open 205 new ones.
- AP