Closings, falling profits make for bitter brew at Starbucks

A customer holds a cup in front of a Starbucks coffee shop at the company's corporate headquarters in Seattle on Monday.(Elaine Thompson/Associated Press)

The coffee may not be watered down at Starbucks, but the company's profits are and there's going to be a dilution of staff as a result.

The Seattle-based coffee company reports profit dropped 69 per cent in its first quarter with sales continuing to slide.

It plans to close 300 underperforming stores around the world by the end of the financial year, in addition to the 600 it already planned to close in the U.S., where it's already closed 384 stores.

A spokesperson for Starbucks said the company does not have specific details about numbers of partners or stores that will be affected in Canada, although any employees will be personally notified of any change to their job status during the first half of February 2009.

The closures could result in the loss of 6,000 in-store jobs. Starbucks also plans to lay off about 700 non-store employees.

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

Starbucks had warned its performance would likely be dismal this quarter, but it even exceeded analysts' expectations.

Revenue fell to $2.62 billion from $2.77 billion, while analysts had predicted revenue of $2.7 billion.

Net income was $64.3 million, or nine cents per share — down from $208.1 million, or 28 cents per share a year earlier.

There was a nine per cent 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 eight per cent.

Starbucks also said its chief executive, Howard Schultz, will be paid just $10,000 in base salary for its 2009 financial year, including health insurance and other benefits.

In 2008, his salary was $1.2 million — about 476,000 short lattes or 336,000 ventes.