Coffee house delays growth
Nov 17 2007 by Peter McCusker, The Journal
COFFEE chain Starbucks is to open fewer-than-expected stores next year as it faces up to the impact of higher dairy prices and a faltering US economy.
Starbucks announced a 35% rise in fourth-quarter profits, but said its US stores saw a 1% drop in customer traffic – the first decrease since it started publishing the numbers three years ago.
It denied it had oversaturated certain markets, but said it would open 100 fewer stores next year than originally forecast. The company opened 615 sites in the latest quarter and 2,571 in the financial year as a whole.
Chief executive Jim Donald said slowing the pace of US store openings would help the company choose the right markets.
For the 13 weeks to the end of September, Starbucks posted net earnings of $158.5m (£77.3m), compared with $117.3m (£57.1m) for the same period a year earlier.
Same-store sales increased 4% worldwide in the latest quarter, towards the low end of the company’s guidance of 3% to 7%.
The company’s shares fell sharply in after-hours trading in New York on Thursday, extending heavy falls seen in the past year amid worries over pressure from higher costs and fears that economic concerns have forced customers to cut back on spending.
Business in overseas stores was healthier, with traffic rising 5% and average transaction values increasing 1%. International revenues rose 31% to $472m (£230.1m), based on 3,000 coffee houses in 37 countries.
While cutting back on store openings, executives will look to sharpen the company’s focus on improving operations in the US.
