Starbucks posts its first quarterly loss

/ Source: news services

Starbucks Corp. on Wednesday posted its first quarterly net loss since it went public in 1992.

The Seattle-based company reported a loss of $6.7 million, or 1 cent per share, compared to a profit of $158.3 million, or 21 cents per share, a year earlier.

Costs related to the famous coffee chain's closure of 600 underperforming stores and its business turnaround led it to post a loss for its fiscal third quarter.

Starbucks said it earned 16 cents per share once the costs for restructuring and closing stores are excluded.

Analysts polled by Thomson Financial expected a profit of 18 cents per share on revenue of $2.61 billion.

Starbucks said revenue rose 9 percent to $2.57 billion from $2.36 billion in the third quarter of 2007.

International, newer U.S. stores do better
Most of the increase was from sales at the company's international locations and at newer stores in the U.S. Same-store sales, or sales at stores open for at least a year, fell in the mid-single-digits in the U.S.

Same-store sales is a key indicator of retailer performance since it measures growth at existing stores rather than at newly opened ones.

The decline, Starbucks said, was a "slight deceleration" from the second quarter, when it also reported a "mid-single-digit" decline in same-store sales in the U.S.

Although sales jumped overall internationally, Starbucks said sales growth slowed in Canada and traffic took a hit in Britain. Analysts and investors had largely been expecting sliding traffic in Britain, where consumer confidence in the economy has taken a hit.

"The U.K. has gotten weaker, I think, in general," said Jack Russo, an analyst with Edward Jones.

1,000 job cuts in the U.S.
Starbucks also cut its profit guidance for 2008 to the "mid-seventy-cent" per-share range, excluding costs. Previously, the company had warned that its profit may fall below the 87 cents per share it earned a year ago.

Analysts are expecting 81 cents per share for the year.

Starbucks also said it expects revenue to jump 11 percent for the full year.

Besides lowering its guidance, the chain said it will open fewer U.S. and international locations in 2008.

That news follows an announcement Tuesday that it would shut 61 stores in Australia. Starbucks also said Tuesday that it would cut another 1,000 office jobs — including 450 unfilled positions — to further cut costs.

The decision to close the U.S. and Australia stores and chop growth has been seen by analysts to be a step in the right direction for the company, whose stock price has fallen by about 47 percent since the start of the year.

Russo said the company is "on the right track" but that "it's going to take time" for profits to get back to where they should be.

He added that investors may be largely focused on the company's 2009 guidance, which stayed the same. Starbucks expects to earn between 90 cents and $1 per share, excluding one-time costs.