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LOS ANGELES, USA - STARBUCKS said it plans to close 600 underperforming stores and eliminate as many as 12,000 full- and part-time positions, lifting shares nearly 6 per cent.
The company, which has been grappling with the slowing United States economy and consumer spending at the same time that major competitors like McDonald's have begun attacking its core business, now plans to close a total of 600 underperforming stores by the end of March 2009.
Mr Howard Schultz, the coffee chain's founder and chief executive, retook the helm in January and quickly announced plans to shutter 100 underperforming outlets.
With US sales growth slowing, he slashed plans for store openings and shifted the company's most ambitious expansion efforts to international markets.
'At this point, management has decided that 2008 is a wash and to throw in everything but the kitchen sink to get ready for growth in 2009 and beyond,' said William Blair analyst Sharon Zackfia.
'It's another sign that management doesn't have their head in the sand,' said Ms Zackfia, who has an 'outperform' rating on the stock.
Starbucks said on Tuesday the closures are spread across all major US markets and that 70 per cent of the targeted stores have been open since the beginning of fiscal 2006. The accompanying job losses would represent about 7 per cent of the company's global work force.
Starbucks estimated that total pretax charges associated with the planned US company-operated store closures, including costs associated with severance, would be in the range of US$328 million to US$348 million (S$446 million to S$474 million).
The Seattle-based company aggressively opened stores in areas such as California and Florida, which have been hardest hit by the US housing downturn. Some investors, worried that the company had built too many outlets in the United States, pushed the company to increase the number of store closures.
'This is validating some of the critics who said they were opening stores too close to one another,' said Mr James Walsh, an analyst at Starbucks investor Coldstream Capital Management.
Starbucks also said it will open fewer than 200 new US company-operated stores in fiscal 2009, down from 250 previously.
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