Approximately 600 Underperforming Stores will be Closed
Company takes Significant Step toward Improving Long-Term Profitable
Growth
Starbucks Corporation (NASDAQ: SBUX) has announced the next step in its
multi-faceted plan to transform the company, with a decision to close
approximately 600 underperforming company-operated stores in the U.S.
market. This decision is a result of a rigorous evaluation of the U.S.
company-operated store portfolio and includes the 100 stores targeted
for closure in the company’s previously
announced plans. In addition, Starbucks now expects to open fewer than
200 new U.S. company-operated stores in fiscal 2009.
The majority of the store closures are scheduled to occur during the
remainder of fiscal 2008 and the first half of fiscal 2009. The timing
of the closures is dependent on finalizing third-party agreements, and
is therefore subject to change. Both full-time and part-time retail
positions will be eliminated, however the company expects to place many
of the affected partners (employees) into available positions at nearby
Starbucks stores.
“In January, we committed to transforming the
company through a series of critical and strategic initiatives to
improve the current state of our U.S. business and build the business
for the long term,” stated Howard Schultz,
chairman, president and ceo. “Our executive
and field leadership teams conducted an extensive review of our U.S.
company-operated store portfolio with a goal of enabling our
organization to focus its efforts on locations where we can more
effectively improve the customer experience.”
“Throughout the history of the company, we
have always aspired to put our people first. This makes our decision to
close stores difficult, because it is disrupting the lives of the people
who have worked so hard to deliver superior service to our customers,”
Schultz continued. “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 U.S. 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.”
The stores identified for closure are spread across all major U.S.
markets with approximately 70 percent of them opened since the beginning
of fiscal 2006. The executive and field leadership teams used several
criteria to identify stores for closure that included locations that
were not profitable at the store level and not projected to provide
acceptable returns in the foreseeable future. In addition to site and
market-specific criteria, consideration was given to the impact of
current and anticipated economic trends.
Pre-tax charges related to the store closures include approximately $200
million of asset write-offs to be recognized in the third quarter of
fiscal 2008. In addition, a projected $120 to $140 million for lease
termination costs and future lease obligations are currently expected,
nearly all of which will be recognized in the fourth quarter of fiscal
2008 and the first half of fiscal 2009. Costs associated with severance
are currently estimated to be approximately $8 million, and the company
anticipates these charges to be recorded during the same timeframe as
the store closures. The aggregate pre-tax charges associated with the
planned U.S. company-operated store closures, including costs associated
with severance, are estimated to be in the range of $328 to $348
million. Upon the completion of the actions, cash charges are expected
to result in a net cash outflow of approximately $100 million, net of
related income tax benefits.
Starbucks will reach out to customers who are impacted by the store
closures in a variety of ways including directing them to the Starbucks
Store Locator at www.starbucks.com.
Customers who have questions or comments on any store or their Starbucks
Experience may contact Starbucks Customer Relations via the web at www.starbucks.com/customer/contact.asp.
Pete Bocian, chief financial officer, will host a half-hour conference
call for the financial community today, July 1, at 5:30 p.m. (ET) to
discuss the announcement. The call will be available as an audio webcast
through the Investor Relations section of the company’s
website at http://investor.starbucks.com.
Starbucks is scheduled to release its third quarter fiscal 2008 earnings
on July 30 followed by a conference call and webcast, at which time the
company will provide additional comments and address the impact of the
store closures on its fiscal 2008 guidance.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to ethically
sourcing and roasting the highest quality arabica coffee in the
world. Today, with stores around the globe, the company is the premier
roaster and retailer of specialty coffee in the world. Through our
unwavering commitment to excellence and our guiding principles, we bring
the unique Starbucks Experience to life for every customer
through every cup. To share in the experience, please visit us in our
stores or online at www.starbucks.com.
Forward-Looking Statements
This release contains forward-looking statements relating to the U.S.
company-operated store closures, including statements regarding the
timing of store closures, charges and expenses relating to the store
closures and the related impact to partners, as well as plans regarding
net new company-operated stores for fiscal 2009. These forward-looking
statements, as well as the underlying estimates and assumptions relating
to such statements, are based on currently available operating,
financial and competitive information and are subject to a number of
significant risks and uncertainties. Actual future results may differ
materially depending on a variety of factors including, but not limited
to, risks related to achieving expected costs savings, income tax and
other benefits associated with the store closures in the anticipated
time frame, if at all, and the risks detailed in the company’s
filings with the Securities and Exchange Commission, including the “Risk
Factors” section of Starbucks Annual Report
on Form 10-K for the fiscal year ended September 30, 2007 and of
Starbucks Quarterly Report on Form 10-Q for the fiscal quarter ended
March 30, 2008. The company assumes no obligation to update any of these
forward-looking statements.
© 2008 Starbucks Coffee Company. All rights
reserved
Starbucks
Investor Relations:
Christy Linn,
206-318-7118
investorrelations@starbucks.com
or
Media:
Deb
Trevino, 206-318-7100
press@starbucks.com
or
http://www.businesswire.com/cnn/sbux.shtml
