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Showing posts with label Wall Street. Show all posts
Showing posts with label Wall Street. Show all posts

Starbucks 1Q profit down 69 pct, shuts more stores

Posted by Posted by Linda on Thursday, January 29, 2009 , under , , , | comments (0)



NEW YORK – Starbucks Corp. plans to slash nearly 7,000 more jobs during a new round of store closures and other cuts, the company said as it reported Wednesday that its profit dropped by more than two-thirds in its fiscal first quarter.

Starbucks barista Alex Igarta hands a coffee drink to a customer from a drive-up Starbucks barista Alex Igarta hands a coffee drink to a customer from a drive-up window at a store near

The gourmet coffee chain plans to close 300 underperforming stores around the world — including 200 in the U.S. — by the end of the fiscal year in addition to the 600 U.S. stores it began closing this summer.

The new store closures could result in the loss of 6,000 jobs, but the company said it will try to offer employees transfers to other nearby locations.

Starbucks also plans to lay off about 700 non-store employees and has reduced the number of new stores it plans to open.

The cuts and changes will result in about $500 million in savings in fiscal 2009, the company said.

With the recession now well into its second year, consumers concerned more about the possibility of losing their jobs than maintaining a $4 daily latte habit are increasingly forgoing the company's brew.

Starbucks also has had to make room for a new lower-priced competitor in the specialty-coffee industry since McDonald's Corp. introduced espresso-based coffee drinks in its U.S. stores.

On a conference call with investors, Chief Executive Howard Schultz implored Wall Street to focus on the company's attempts to bolster its business for the long term instead of worrying about its quarterly profit and sales results.

"We believe all of the work we are doing will pay off in the long run," Schultz said. "We feel good about the progress we are making."

Edward Jones analyst Jack Russo said the cuts make sense given the decline in Starbucks' sales in recent quarters.

"This is going to be a transition year," Russo said. He said the company will have to "claw their way back."

Wall Street had largely expected Starbucks to report dismal performance for the quarter, which ended Dec. 28, because it had warned last month that slow sales likely would cause it to miss analysts' estimates.

Heeding the company's warning, analysts lowered their average expectation from 22 cents per share to 17 cents per share.

But the company still fell short, with net income of $64.3 million, or 9 cents per share, down 69 percent from $208.1 million, or 28 cents per share a year earlier.

Excluding charges from closing the 600 U.S. stores and 61 stores in Australia, the company's profit was still 2 cents per share shy of analysts' estimates, which typically exclude special items.

Revenue fell to $2.62 billion from $2.77 billion, while analysts had predicted revenue of $2.70 billion.

The revenue drop stemmed from a 9 percent decline in same-store sales, or sales at locations open at least a year, considered a key gauge of restaurant and retail performance. That dip was worse than the company's fourth-quarter decline of 8 percent.

The company's U.S. same-store sales dropped 10 percent in the first quarter. The company said its international business suffered the most in Canada and the U.K.

Schultz said Starbucks will offer customers more value through breakfast "pairings" at new prices but declined to offer any specifics.

Starbucks also said Schultz asked the company's board of directors to cut his salary last week. The board agreed to pay Schultz just $10,000 in base salary for fiscal 2009, including health insurance and other benefits.

Schultz, whose salary was $1.2 million in 2008, still could take home millions in the form of stock options. In the last fiscal year, he received stock options worth $7.8 million when granted, which helped boost his total compensation near $10 million.

The company said it plans to open only 140 new stores in the U.S. in fiscal 2009, down from its previous target of 200. Overseas, it will open 170, down from the 270 it had planned to open.

Starbucks added it would sell one of its two corporate planes and will reach out to landlords to try to negotiate lower rents for its stores.

The company also said it will not provide any sales or earnings guidance "given the uncertainty in the global consumer retail environment."

The company also declined on the conference call to discuss sales trends for January.

Shares fell 24 cents to $9.41 in electronic after-hours trading after rising more than 5 percent during regular trading Wednesday.

Fed slashes key rate to near zero

Posted by Posted by Linda on Wednesday, December 17, 2008 , under , , | comments (0)



The U.S. Federal Reserve cut a key rate Tuesday to a range of between zero and 0.25 percent -- a cut of at least 0.75 percent.

Professionals at the New York Stock Exchange react to the Fed announcement.

Professionals at the New York Stock Exchange react to the Fed announcement.

The central bank typically sets a specific target for its federal funds rate instead of a range.

With a target range of zero to 0.25 percent it is the lowest level on record, going back to 1954 -- and the latest attempt to stimulate the U.S. economy.

Before the announcement Tuesday afternoon in New York, the rate was 1 percent -- meaning the cut is at least 0.75 percent.

The federal funds rate is an overnight lending rate used as a benchmark to set rates for a variety of consumer loans, including adjustable rate mortgages, credit cards, home equity lines of credit and business loans.

This rate is the Fed's key tool for spurring or slowing slow the U.S. economy as it tries to balance its dual goals of economic growth and price stability. Lower rates are designed to encourage spending by making borrowing more affordable.

CNN Chief Business Correspondent Ali Velshi said the zero to 0.25 perecnt range gives the Fed some room to maneuver. Video Watch Ali Velshi report on the rate's record-setting low »

In the minutes before the Fed's announcement the Dow Jones was up 1.25 percent, the Nasdaq composite 2.3 percent and the Standard & Poor's 500 index 1.6 percent .

By the close the Dow was up about 4.2 percent, according to early tallies, while the Nasdaq and the S&P were both up more than 5 percent.

The central bank was widely expected to cut the federal funds rate but not by so much.

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In a written statement, the Fed said the U.S. economy, which has officially been in a recession for a year, is in danger of getting weaker, and the risk of inflation had decreased "appreciably."

At the close in Europe -- which was before the U.S. announcement -- London's FTSE 100 was up 0.7 percent, while the CAC 40 in Paris rose 2 percent and the DAX 30 in Frankfurt was 1.3 percent higher.

Asian markets were mixed, with Toyko's Nikkei and the All Ordinaries index in Australia both closing just over a percent lower. In Seoul, however, the KOSPI gained a third of a percent, while Hong Kong's Hang Seng picked up 0.6 percent.

The jitters in Asia came after Wall Street lost ground Monday, giving back Friday's modest gains. The Dow Jones lost about 65 points, or 0.75 percent, while Standard & Poor's 500 index fell 1.3 percent and the Nasdaq composite slid 2.1 percent.

Two other isses were impacting the market -- the Madoff financial scandal and continuing uncertainty about the future if the U.S. auto industry.

Money manager Madoff, a Wall Street figure and former Nasdaq chairman, was arrested last week on charges that he instigated a $50 billion pyramid scheme that hit companies worldwide.

And investors are still focusing on the troubled U.S. automakers after the Bush administration said last week that it might offer General Motors and Chrysler bridge loans from the $700 billion bailout fund Congress set aside for Wall Street. However, President Bush has so far declined to give a timeline for any action.

Dickson said: "Investors are expecting a rescue package to be announced, and most of that is baked into the market already."