I am not going long on this yet. But, I like the fact that CEO requested to cut his pay to $10k per annual or the minimum to cover his family expenses.
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Starbucks to Cut 6,700 Jobs After Earnings Fall 69%
http://www.bloomberg.com/apps/news?pid= ... efer=home#Jan. 28 (Bloomberg) -- Starbucks Corp., the world’s largest chain of coffee shops, said it will cut 6,700 jobs and close 300 more stores after reporting first-quarter profit that fell more than analysts estimated.
The company plans to close 200 locations in the U.S. and 100 overseas, in addition to the 600 Starbucks said it would close last year. The workforce reduction will eliminate 6,000 café positions and 700 corporate jobs, the Seattle-based chain said today in a statement.
Chief Executive Officer Howard Schultz warned in December that Starbucks’ profit would be less than analysts’ estimates at the time as sales in established stores worsened in November. Customers pinched by job losses and falling home prices are cutting back on premium coffee. The firings and closings announced today further accelerate Schultz’s plan to trim costs.
Schultz also asked the board to cut his annual base pay to less than $10,000, or the minimum required to maintain benefits for him and his family, spokeswoman Deb Trevino said today in a telephone interview. His base pay was about $1.2 million in 2008. Starbucks is also selling a corporate jet, bringing the fleet to one plane following a similar sale late last year.
“The only grown-up attitude and thing for them to do in this environment†is to adjust to the declining revenue, Sharon Zackfia, an analyst with William Blair & Co. in Chicago, said today in a Bloomberg Television interview. “You have to give this company credit for coming up with ways to bolster their margin even though same-store sales are down.â€
Trimming Expenses
The additional measures increase the company’s plan to trim costs by $100 million this year, to at least $500 million, Starbucks said. Starbucks may save more next year as the store closings take effect, Chief Financial Officer Troy Alstead said on a conference call.
Sales at U.S. stores open at least 13 months dropped 10 percent in the first quarter. The company had a total of 16,875 stores, including franchised locations, as of Dec. 28.
“The pace of weakening in the business environment and the global economy has been accelerating,†Schultz said on the conference call today. “I’m far from pleased with our performance this quarter and I anticipate that our results could remain under pressure until the economy begins to recover.â€
Starbucks rose 50 cents to $9.65 today in Nasdaq Stock Market composite trading. The stock has lost 51 percent in the past 12 months.
‘Slow Drip’
The coffee seller in July said it would close 600 company- operated stores in the U.S. and 61 shops in Australia. The move slashed 12,000 café positions, although about 70 percent of workers were able to transfer to nearby locations, resulting in about 3,600 jobs lost.
Net income dropped 69 percent to $64.3 million, or 9 cents a share, from $208.1 million, or 28 cents, a year earlier, the company said in the statement. Sales fell 5.5 percent to $2.6 billion in the period ended Dec. 28.
Excluding some restructuring costs, profit was 15 cents a share. The average of 16 analyst estimates compiled by Bloomberg was for profit of 17 cents a share on sales of $2.71 billion. The company doesn’t give quarterly forecasts.
The store closings announced last year are still being implemented, and the shutterings announced today will be carried out through the year that ends in September, Starbucks said. Half of the corporate cuts announced today will come from Seattle.
“I’m hoping 300 stores is enough, and that they’ve done what they need to do,†said Patty Edwards, a retail analyst with Storehouse Partners in Seattle. “Slow drip, even in coffee, isn’t necessarily the best thing. Sometimes you just need to get the pain over with.â€
