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Starbucks Posts First Quarterly Loss As a Public Company

July 30, 2008

By Melissa Allison, Seattle Times

Jul. 30–For the first time in more than 15 years as a public company, Starbucks lost money during the latest quarter because of $167.7 million in restructuring charges largely from the closures of 616 stores nationwide.

Including those one-time charges, Starbucks lost $6.7 million, or a penny a share, during the third quarter ended June 29. That’s down from net income of $158.3 million a year ago.

Without the charges, Starbucks would have posted a profit of 16 cents a share — still below the consensus forecast of 18 cents, according to Thomson Financial.

The coffee giant hasn’t reported a quarterly loss since going public in 1992.

The company was plagued during the quarter by continued reduced traffic in the U.S., a slight decline in U.K. traffic and slower sales growth in Canada.

Starbucks lowered its earnings-per-share target for the year to “the mid-70-cent” range, after telling investors in April that earnings would be “somewhat lower” than last year’s 87 cents.

The coffee giant also slowed its growth plans again, saying it will open 900 new stores in the U.S. this year, down from an earlier projection of 1,000. International store openings will slow to 825 from the previously projected 975.

Many analysts have written off this fiscal year, which ends Sept. 28, and are looking to the future.

“I wouldn’t get too caught up in the loss, because they wouldn’t have had that loss if they didn’t have one-time charges,” said Jack Russo, an analyst at Edward Jones in St. Louis.

Stock traders seemed to agree, sending Starbucks shares up nearly 5 percent in the first 30 minutes of after-hours trading following release of the earnings.

“The big issue is what is being done to correct this,” Russo said. “So far, we don’t know if these changes are working, but clearly they’re doing the right things.”

He pointed to the store closures, management shifts and 1,000 job cuts announced Tuesday as evidence that Starbucks takes the situation seriously.

“It’s going to take time, and people have to be patient here. It would be helpful to get a boost from the economy, and that remains to be seen.”

Starbucks shares fell 32 cents to $14.67 in regular trading, before the after-hours earnings announcement.

The stock gained 73 cents to $15.38 within a half-hour of the announcement.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

By the numbers:

180 — Jobs cut in Seattle this week

1,000 — Jobs cut nationwide this week

13,700 — Job cuts announced this year

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Copyright (c) 2008, Seattle Times

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