Starbucks to cut up to 12,000 jobs, close 600 stores

By Lisa Baertlein

LOS ANGELES (Reuters) - Starbucks Corp said on Tuesday it plans to close 600 underperforming U.S. stores and cut up to 12,000 full- and part-time positions, as it copes with an economic downturn and increasing competition.

The coffee seller, bracing for its first full-year profit decline since 2000, has been grappling with the slowing U.S. economy and consumer spending at the same time that major competitors like McDonald's Corp have begun attacking its core business.

Starbucks plans to close the company-operated stores by the end of March 2009. The related job cuts would reduce the company's U.S. workforce by about 8 percent.

The news lifted shares nearly 5 percent.

In a conference call with analysts, Chief Executive Peter Bocian said the move should improve company's domestic profitability and help it meet previously issued forecasts calling for accelerating earnings for fiscal 2009 through 2011.

In January, Starbucks brought back founder and chief executive Howard Schultz to turn around the company. Soon after, Schultz targeted 100 stores for closure -- a number that grew by 500 when firm plans were announced on Tuesday.

He has also slashed plans for store openings and shifted the company's most ambitious expansion efforts to international markets.

"At this point, management has decided that 2008 is a wash and to throw in everything but the kitchen sink to get ready for growth in 2009 and beyond," said William Blair analyst Sharon Zackfia.