This article is from the Australian Property Journal archive
AFTER sprouting up chain after chain on every corner in the United States, Starbucks' caffeine overdrive growth has been diluted by a flat US economy.
The café chain will close 600 stores in the next year in a move expected to cost $US328 to $US348 million, and it now expects to open fewer than 200 new stores over the next few years.
Meanwhile, Starbucks’ chief financial officer Pete Bocian said yesterday 70% of the stores slated for closure had opened since the start of 2006.
Starbucks’ chairman, president and chief executive Howard Schultz said the company is committed to transforming through a series of critical and strategic initiatives to improve the current state of its US business.
“We sincerely thank each one of them and are very proud of their many contributions to the company. At the same time, we recognize that it is necessary to make decisions that will strengthen the US store portfolio and enable us to enter into fiscal 2009 focused on enhancing operating efficiency, improving customer satisfaction and ensuring long-term value for our partners, customers and shareholders,” he added.
Pre-tax charges related to the store closures include approximately $US200 million of asset write-offs and $US120 to $US140 million for lease termination costs and future lease obligations.
And costs associated with severance are currently estimated to be approximately $US8 million.
It is expected that around 12,000 workers or 7% of Starbucks’ global work force will be affected by closures.
Starbucks has yet to announce whether it will close its 85 chains in Australia.
At the end of March, there were 16,226 Starbucks stores globally with 7,257 in the US and 1,867 in Europe, Asia and Australia. The other 7,102 stores are operated by licensees.
Australian Property Journal
