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Starbucks to cut 1,000 non-store jobs

Starbucks Corp., which already plans to shut 600 stores, said Tuesday it is also cutting almost 1,000 office jobs as part of its bid to re-energize the brand and boost its profit.
Image: Starbucks
A closure notice is pictured outside a Starbucks in Northern Sydney, Australia. The coffee giant announced they will close 61 Australian stores within days, shedding 685 jobs. Jenny Evans / EPA
/ Source: The Associated Press

Shares of Starbucks Corp. fell slightly on Wednesday as investors prepared for the company's fiscal third-quarter earnings report, just one day after the coffee chain said it is cutting almost 1,000 office jobs to help boost profit.

Of the new cuts, 550 of the positions are layoffs and the rest are unfilled jobs.

Analysts expect the company's results to show a substantial decline in profit because of slower traffic and a drop in sales at established stores.

For the company’s investors, the store closures and layoffs offer some hope that the chain’s declining traffic, profit and stock price may all rise again.

But optimism is absent among many of the company’s employees, who say Starbucks is hurting its workers and customers to save its stock price. The shares have sunk 47 percent in the past year.

“Closing stores is definitely not for the employee or customer’s benefit,” said Dave Ebert, a 21-year old barista in Minneapolis whose store is closing. “It seems like a lot of their business decisions lately have been shareholder-focused.”

The latest round of job cuts are in addition to the layoffs from the store closures, although not all employees at stores that are closing will lose their jobs. In a letter to employees Tuesday announcing the newest wave of job cuts, Chief Executive Howard Schultz said about 70 percent of employees in stores set to be closed this month have been transferred to other locations.

As of September 2007, Starbucks had more than 172,000 employee worldwide.

Schultz also announced several management changes on Tuesday. Martin Coles, chief operating officer, will be the new president of the company’s international business. The company said the COO position will be eliminated. Former international president Jim Alling is leaving the company, Schultz said.

Starbucks has been considering making the management changes and the job cuts since at least July 1, when Schultz said the company was “conducting a rigorous evaluation” of its non-store organization “with the goal of realigning our organization to support the current business environment and improve efficiencies globally.”

Some employees appeared to know their jobs may be on the line by Monday night, when their bosses requested they meet the next day. On message boards used by Starbucks employees, workers were calling the day “Black Tuesday.”

“I am a store manager and while I feel relatively safe at the moment, there is no real job security in watching the company you work for fail,” said one employee who posted a message Monday night.

Analysts say the closures and cuts will let Starbucks focus on increasing sales at its remaining stores and selling its new products. Those include two varieties of a new smoothie drink, called Vivanno, a new energy drink and changes to its warm breakfast sandwiches.

But they say it will take some time before the company sees any benefit from the moves. And some baristas say the changes like automatic espresso machines and banana smoothies aren’t likely to bring more coffee-loving customers in the door.