(Adds details, analyst and comment; updates stock activity)
By Lisa Baertlein
LOS ANGELES, July 30 Starbucks Corp (SBUX.O)
posted its first quarterly loss as a public company on
Wednesday and said its U.S. coffee chain would shrink in the
year ahead, but investors stunned by months of uncertainty sent
shares up 4 percent as it stuck by its profit target for 2009.
Starbucks had been an engine of steady expansion since it
went public in 1992, but sales growth has been slowing in the
United States for more than a year, and the problem worsened as
the housing market slumped and gas prices rose.
On Wednesday, the company lowered its 2008 profit forecast,
saying fewer customers were visiting U.S. stores and costs were
Chief Executive Howard Schultz warned that U.S. consumers
were still hurting and cut the 2008 U.S. store-opening target
for the third time this year.
"We want to be as cautious as possible and not over-expand
at a time when the consumer may be under significant pressure,"
Schultz said on a conference call.
He also lowered 2008 and 2009 targets for opening
international stores. Overseas growth had been cast as the
growth engine of a recovering company.
Morningstar analyst John Owens said Starbucks isn't yet out
of the woods.
"Over the long run, I think Starbucks has very good
prospects for turning the business around, but whether we
really start to see some benefits in 2009, that's uncertain,"
RBC Capital Markets analyst Larry Miller said the company's
2009 profit target appeared within reach and that its decision
to stand by the forecast could put a floor under Starbucks
shares, which have lost nearly half of their value over the
Starbucks, which has been criticized for building too many
shops in the United States, announced at the beginning of the
month it would close 600 domestic stores and 61 in Australia.
The company expects to make 200 of the U.S. store closures in
the fourth quarter and the remainder in fiscal 2009.
With the closures, Starbucks expects to have a net decrease
of 60 stores in the United States in 2009.
Chief Financial Officer Peter Bocian said the job cuts and
store closures would save 17 to 18 cents per share next year.
He reiterated the company's fiscal 2009 forecast for
adjusted earnings of 90 cents to $1 per share, a move that
analysts said sent shares higher, in part because it was based
on modest same-store sales and minimal price increases.
SWING TO LOSS
Starbucks reported a fiscal third-quarter net loss of $6.7
million, or 1 cent per share, compared with its year-earlier
net profit of $158.3 million, or 21 cents per share.
Costs related to store closing and restructuring pushed it
into a loss. Excluding 17 cents per share in charges, Starbucks
had a per-share profit of 16 cents, lagging the 18 cents
average Wall Street target, according to Reuters Estimates.
Total revenue rose a slower-than-expected 9 percent to $2.6
billion, as U.S. business deteriorated from the prior quarter
and contributed to a mid-single-digit decline in sales at
Starbucks said traffic during the latest quarter softened
in the United Kingdom -- which is coping with its own housing
crisis -- and that sales lost momentum in Canada.
During the quarter, Starbucks rolled out Vivanno smoothies
and an icy drink called Sorbetto, which executives said have
helped boost afternoon sales. The company, which will be
selling gift cards at Costco (COST.O) club stores, also plans
to roll out healthy food options in the fall.
Citing weak traffic and increased costs, Starbucks now
expects full-year fiscal 2008 earnings in the mid-70 cent
range, excluding the charges related to store closures and its
The company, which is bracing for its first full-year
profit drop since 2000, had previously forecast 2008 earnings
that were "somewhat lower" than the 87 cents reported last
The company lowered its U.S. store-opening targets for
fiscal 2008 to about 900 net new stores, evenly distributed
between company-operated and licensed. It had previously
targeted 1,020 openings.
Internationally, Starbucks now sees about 825 net new store
openings during fiscal 2008 -- including the closures in
Australia -- about 90 stores less that previously forecast.
Capital expenditures for fiscal 2008 are now expected to be
about $1.0 billion, below the $1.1 billion previously
Internationally, Starbucks is planning to open about 900
net new stores in 2009, compared with about 1,050 previously.
For 2009, the company now sees capital expenditures of
about $750 million, reflecting the reduced store targets for
the U.S. and International segments.
Starbucks shares rose to $15.30 from their Nasdaq close of
(Reporting by Lisa Baertlein; Editing by Gary Hill and Andre