Starbucks to slash U.S. store openings through 2011

By Lisa Baertlein

LOS ANGELES (Reuters) - Starbucks Corp (SBUX.O: Quote, Profile, Research, Stock Buzz) said on Wednesday it would slash U.S. coffee store openings through 2011 as it adjusts to slower U.S. growth and turns its focus to expanding newer international markets.

The company, which warned last week of the worst economic environment in its history, blamed the domestic housing crisis for a significant quarter-over-quarter deterioration in U.S. customer traffic and said it saw early signs of a potential traffic slowdown in the United Kingdom, which may be related to economic problems there.

Chief Executive Howard Schultz, brought back in January to lead a turnaround of the company, continued to dismiss fears that Starbucks was overbuilt or that new competitors like McDonald's Corp (MCD.N: Quote, Profile, Research, Stock Buzz) were stealing customers with coffee drinks.

The U.S. mortgage meltdown was leaving customers less to spend, he argued.

"We strongly believe it is not the competition ... We don't believe that we've saturated the market, but we do believe that we have a head wind the likes of which we've never seen," Schultz told analysts in a conference call.

Wall Street was lukewarm to the company's pull-back in new openings.

"It's not really surprising that they've slowed their store growth. The fact that they are making plans to slow it is certainly better than what they were telling us before," said John Langston, an analyst at Hodges Capital Management.

On Wednesday, the coffee shop chain posted fiscal second-quarter net income of $108.7 million, or 15 cents per share, compared with $150.8 million, or 19 cents per share, a year earlier.