Starbucks announced it will close down 100 stores and slow down its opening of new US stores from 1,600 to 1,175 during 2008. The international company said it the closings will gradually help optimize current resources.
The Seattle-based company reported fiscal first-quarter net income of $208.1 million, or 28 cents a share, compared with net income of $205 million, or 26 cents a share, a year ago. Faced with stiffer competition and more value-conscious consumers, reported transactions at its US stores fell 3% from a year ago for the quarter ended Dec. 30.
Starbucks, following its rapid growth throughout the 1990s, changed its strategy this decade, feeling more like a fast-food chain. It served breakfast sandwiches, sold music, opened drive-thru windows, and stopped making espresso by hand. It uses automated machines.
The company’s characteristically high growth rate showed marks of fatigue last year, unnerving investors, who sold off the stock. Shares are down 43% over the past year.
The company pegged fiscal 2008 earnings growth in the “low double-digits.” It had previously forecasted earnings growth in the 17% to 21% range, or earnings of $1.02 to $1.05 a share. Its fiscal year ends in September.
McDonald’s has steadily moved onto Starbucks’ turf during the past year, selling new coffee, undercutting Starbucks on price, and installing coffee baristas. Recently, Starbucks started testing $1 coffee and free refills at a few of its locations in Seattle.