Starbucks closures contribute to third quarter loss

Starbucks Corporation today reported its first quarterly net loss for over 15 years, as the cost of closing down under-performing company-owned stores begins to bite.  ┬á For the third quarter ended June 29, 2008, financial results for the Seattle-based coffee chain show a loss of $6.7 million, compared to a net income of $158.3 million a year earlier. Earnings per share (EPS) for the quarter were $(0.01), compared to $0.21 per share earned in the prior year period.┬á┬á Starbucks also revised its expectations for fiscal 2008, and cut the number of new stores it plans to open. The US will see a net reduction of 60 stores, as 165 planned openings will be outweighed by 225 closures.┬á┬á Starbucks estimated that costs associated with the implementation of its ÔÇ£transformation agendaÔÇØ impacted third quarter 2008 EPS by approximately $0.17 per share, primarily for restructuring charges associated with the closure of US company-operated stores. ┬á┬á The company declared restructuring charges of $167.7 million, comprised of asset impairments for the approximately 600 underperforming company-operated US stores, initially announced on July 1, 2008. ┬á┬á The majority of the store closures are scheduled to occur during the remainder of fiscal 2008 and the first half of fiscal 2009, and the related lease exit costs and severance expenses are expected to be recognized during that time frame. ┬á┬á Starbucks said revenue for the quarter rose nine percent to $2.57 billion from $2.36 billion in the third quarter of last year, mainly from sales at international locations and new stores in the US. Same-store sales (at stores open for at least a year) fell in the ÔÇ£mid-single-digitsÔÇØ in the United States.┬á┬á Starbucks also announced earlier this week that it was closing 61 of its 85 stores in Australia. It is also cutting 1,000 office jobs (including 450 unfilled positions) to reduce costs.┬á┬á "While we recognize the near-term impact to our business from this transitional year, we also believe this is the right approach toward strengthening our business model and creating a healthy, solid foundation for fiscal 2009 and beyond,ÔÇØ said Howard Schultz, chairman, president and CEO. ┬á┬á ÔÇ£The store closures and organizational restructuring we announced this month resulted from rigorous evaluations of the entire business. While this has led to difficult decisions that impact the lives of our partners, customers and the communities we serve, these were necessary actions to transform our business and allow us to focus on delivering significant improvement in our long-term financial performance." ┬á┬á Read StarbucksÔÇÖ announcement in full here.  ┬á┬á┬á*┬á┬á┬á┬á┬á┬á┬á┬á┬á *┬á┬á┬á┬á┬á┬á┬á┬á┬á *