Wednesday, July 30, 2008

Starbucks retreat excites investors, not customers

Investors might have been cheered Wednesday when U.S. coffee giant Starbucks Corp. detailed its plans to close 600 stores in the United States and lay off 12,000 workers, but legions of coffee drinkers probably had a much different reaction. Starbucks may well have brought the pleasures of premium coffee to tens of millions of U.S. residents, but the chain has dealt a mortal blow to family owned-and-operated coffeehouses that were long a staple in the urban setting. The chain's aggressive (acknowledged, finally, as over-aggressive) expansion killed off many independently owned coffeehouses in small communities. Now, the chain's retrenchment could leave a void. But that is not the concern of Wall Street investors, who pushed the company's shares up by four percent despite its first quarterly loss ever, according to the Reuters international news service. On Wednesday, Starbucks reduced its new-store expansion and posted a loss of $6.7 million in its fiscal third quarter, Reuters said. The loss was Starbucks' first since going public in 1992. The chain earned $158.3 million in last year's third quarter. Starbucks plans to close 200 U.S. stores in the next quarter and close the remaining 400 in its next fiscal year, which begins in October.

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