Starbucks to close 300 more stores, cut over 6,000 jobs as quarterly profit plummets

For the quarter ended Dec. 28, Starbucks reported net income of $64.3 million, or 9 cents a share, which included charges to shut down stores and lay off workers. A year ago, the coffee-shop chain earned $208.1 million, or 28 cents a share. (Reuters) || Read Starbucks' release and CEO Howard Schultz's letter to employees. || Jump to most recent comments

Comments

[PhillySM]

I have heard nothing referred to as a "bonus" plan. This week we have received information about a whole bean incentive for which your store receives $1 for every pound of beans you sell over your goal (which is provided for you by your DM). Changes to SM and ASM bonus plans were announced in the last few months but nothing was included in those changes I would call "exciting". The whole bean incentive will probably increase whole bean sales but I can't see a long term boost with this incentive. After it ends, most likely bean sales will drop to normal levels. Most stores come up with all sorts of "deals" for customers to increase their bean sales in order to win- buy a pound, get a pound free; buy a pound, receive a free drink; buy a pound and we'll donate a pound for the troops, etc.

[lattegal]

Melody -

Beginning in March we will offer several breakfast pairings at attractive price points. (not verbatim)

When I heard him say this I thought "this sounds like Value Meals"

[lattegal]

Melody -

Did anyone else just hear Troy Alstead say that Howard Schultz is now going to earn $10k a year and not 1.9 mill?

Yes, Troy actually said that Howard would not be making his 1.2 million salary but it would be LESS THAN $10k a year. I respect that and it shows me that he is listening.

[chloe]

sample cup - i completely agree. they've taken non-coverage away from the stores, so what do the DMs do all day? ecosure audits, rearrange retail, on email and phone 95% of the time. i'm with you - i love my DM, but i just don't think the company needs 1 per 10-12 stores anymore. he could handle 20-24 stores. the licensed DMs do.

[Melody]

Oh lattegal, we should have a good cry together over coffee, I heard that and understood "value meals" too - one year ago Howard said he'd NEVER do that! That was the most depressing part of the conf call: Value meals are really coming to Starbucks.

[lattegal]

PhillySM -

Yes, the incentive you posted is what I had heard about. And it's definitly not some "Bonus Scheme" as Mr. Burrows had mentioned.

Also, in the conference call it was stated that Starbucks did very well and "sold out of the Thanksgiving and Christmas blends". Was it just my store that had 30+ lbs of Thanksgiving blend left which we had to make and sell by the cup along with the Christmas blend. And we had Christmas blend that we were selling at 50% off during the first few weeks of January. Did this only happen at my store?

[lattegal]

Melody -

Did you hear Howard mention several times about "getting back to coffee"? I thought it was strange and I'm not getting my hopes up. I mean we are in the midst of a "tea" promotion and I haven't really felt like we're heading in the coffee direction all year. I'm not in Seattle so we don't have the Clover, the only thing NEW in coffee drink has been the Espresso Truffle and that's a sweet drink...I mean it's good...but it's not "COFFEE".

Yes Lattelegal...since your store had left over Thanksgiving blend, you will be closing. Seriously though no store in my area had Thanksgiving blend left and we sold out of Christmas blend December 23rd.

[GRTL]

I BEG them to get rid of SHC. I loathe it with every fiber of my being. Another thing to mix and mix and mix every morning. How many versions of this do we need?

Do Americans need to be fatter?

[PhillySM]

lattegal- In reference to "selling out of Christmas and Thanksgiving", I think it depended on your store. I had lots of both coffees left in my store after their promotional period ended. However, I was transferring my extra to stores who had sold out of their promo coffees. My store is not typically a bean store and we rarely sell over 70 pounds per week.

[ndemystic]

I feel I have post traumatic stress syndrome. I can not stop reading these threads and should be out pouning the cement looking for a new job. I have applied online for 3 or 4 jobs, though. But I am really hesitant to take a new job for fear that I will be trained and work for 5 months and then laid off again. It makes you feel like the weakest link even if you were doing a superior job. Never late, not miss a day connecting with the Customers...oh, that's right I am a Real Estate agent I will just find a buyer...not.

C'mon GRTL, what on earth does that have to do with layoffs, the financial crisis, or anything at all in this thread...I personally think GRTL's are quite disgusting and I would bet that SHC sells better than your beloved GRTL nationwide, but that has nothing to do with the "downfall". There are many drinks that aren't for everyone...

[lattegal]

Another thing in the conference call that bothered me was that Howard said that they have really been focusing on Breakfast and making Starbucks a breakfast destination. That's interesting because no where on the cafe or drive thru menu does it mention that we even sell breakfast sandwiches. I don't have an MBA but it seems that if you are trying to make your business a breakfast destination that you would include these items on your menu.

[shotatlove]

wow

[CamSpi]

Makes me so sad!
My prayers go out to everyone who is affected by this.

[GRTL]

My complaint about SHC was the fact that it is wasteful spending. Analysts have been begging Starbucks to go back to their core but all the time, new drinks, new products, overstocked shelves all in a desparate attempt to make money. GRTLs have been around for a long time now and it more rooted in Starbucks Coffee and Tea than Hot Chocolate is...

Sbux wants to make money and survive. Reduce the prices!!!!! If Quizos and Subway could see the tide changing and offer $5 sandwiches then Sbux can reduce prices by 25 cents.

[Philip]

Ohhhhhhhhhh HOWARD

How you have LET US DOWN!!!

I thought your "coming back" was supposed to "REVOLUTIONIZE" the company and "GO BACK TO OUR ROOTS!" What the hell are you doing, man???

Why don't you get rid of District Managers and Area Managers since we never see them anyway? I could do their jobs by myself *and* run a store.

We never see the DM's and AM's, and I bet they get overpaid and don't do much. Why not make the districts larger, get rid of fatter salaries and keep the baristas and store mgmt teams? (In store, I mean?)

HOWARD... you have FAILED!!!!!!!!!!!!!!

TRIM YOUR PRICES, then sales will increse! Don't start messing with partners "total pay" now that's just a sham!!!

p

[jabanga]

oh how the mighty have fallen.

[Sheri]

HOWARD.. WHY DON'T YOU JUST STEP DOWN? EVER SINCE YOU CLAWED YOUR WAY BACK UP TO BEING CEO YOU HAVE DONE NOTHING BUT CLOSE STORES!!

gEE, THANKS.

Let's start a petition! howard needs to STEP DOWN!

My 401k is shattered... What about yours?

x

[Melody]

[quote=GRTL]Sbux wants to make money and survive. Reduce the prices!!!!! If Quizos and Subway could see the tide changing and offer $5 sandwiches then Sbux can reduce prices by 25 cents.[/quote]

The Clover, I suspect is very slowly tanking for that reason. In today's economy most people will not spend $3.95 for a Grande cup of black coffee. Before August 26, 2008, Starbucks did a flat pricing on the Clover products and, for example, a tall was always $2.50. Now a tall could be $3.45 for, say, a tall Kenya Kangocho (a previous offering). Am I the only who thinks that $3.45 for a tall cup of coffee is a lot of money?

[whatwhat]

I think it is noble of Howard to volunteer to reduce his pay so drastically, but this also scares the crap out of me!

I feel like this is a last resort type of thing. I've worked for companies that have closed before and this just doesn't feel right to me.

[CamSpi]

I appreciate the letter from Howard. I do not blame him entirely for the company doing as poorly as it did a year ago. I believe the economy is affecting all company's (with a couple of exceptions). It's very unfortunate that the economic climate has hindered the company's ability to be all that it can be.
Nonetheless, while we work, we can do what we can and do our best! Starbucks has a positive legacy, and I urge all partners to not stop reaching for the best!

[Angry Investor]

9 cents per share in INCOME...after you pay the bills that means that technically, anyone who owns SBUX stock owes money...hardly profitable.

[GRTL]

Yes Melody 100% agree with you there. This is exactly the reason why Wal-mart had a better holiday season. People are becoming thrifty and are not willing to spend the money. This is why our tea sales have increased 10 fold. Because it is cheaper. People want to save money and a $3 latte is too expensive.

Why not market $3 venti lattes? Kind of like the $5 sandwich.

I think the value menu is a bad idea as it only deminishes the already weakening "brand". Reducing your prices does not but creating a fast food atmosphere and claiming you are not does.

I hope my job is not cut. I can't afford to be without it and it's my 2nd job too.

[Will]

Angry investor -- do you understand the word "net?"

what about subway? subway sandwiches?

[BAYAREABUX]

I can't believe vacation is going away.

In this environment we need a little WORK / LIFE BALANCE more than ever!!

[Daddyo]

Starbucks' future lies in licensed stores...In my town (Memphis) we closed or are closing at least 12 (now probably more) stores while licensed stores continue to pop up all over town...even directly in front of or next to existing company-owned stores. With licensed stores, the company gets it's money regardless of how the stores perform. Operations and the resultant cost is totally left to Target, Kroger, the airport or hospital that the licensed store is in. Blow me Howard. He should be working for free...he's been raping the partners and shareholders for many, many years...it's not about to change.

[Del Duncan]

Personally, I'm tired of the assault on the average worker. I tip service employees well, myself, because I believe that by and large, they deserve it and the companies don't compensate them fairly to start with. My own company has done similar things over the past few years in terms of reducing pay and benefits. Starbucks at one time stood above the crowd in pay and benefits but now, just another corporate entity that is doing the minimum for its employees. Well, what this does for me is to reinforce what I've been doing, and that is to visit my local coffee shops instead of Starbucks. I spend 80-90% of my money there now and only use Starbucks on the road or when it's inconvenient to get to my local shops. It's too bad, because I personally have always liked Starbucks, although it's getting waterdowned in terms of the coffee taste and the experience. Other than sadness at people losing their jobs, I could care less about Starbucks future as a corporation and for its "investors".

[Crema_the_crop]

I believe the "bonus" program would in fact be the whole-bean sales incentive. It was announced on Monday, along with the changes to the Vivanno recipe and the new decaf brewed coffee initiative. It seemed to me like a weak, feeble attempt at a shot in the arm for the store-level employees.

Remember Black Apron Exclusives? The kits that came with those books, and preground packs for the brewers?

Remember coming on in the morning, smelling the open bullets of a spicy and herbal Komodo Dragon, a round and nutty House Blend, and some actually-worth-tasting decaf Sumatra?

Working on passports, doing coffee master tastings and pairings...

[MN-SM]

CamSpi-- Income is after the bills have been paid--we MADE 9 cents per share--not alot---but still made money. The problem is investors who want more more more $$ in their pockets. To me..if a company makes $1 profit right now, that's good.

[Tim]

I'm sorry, did they not just say recently "any future job cuts would still be restricted to non-retail positions?"

And here we are, even more shorthanded. What was that about returning to the third place?

Freakin' liars.

[green_cup]

Well, I will say that it is admirable that Howard Schultz decreased his salary and is attempting to sell ALL of the planes.

Now get me some decaf and some bold on-hand at all times and we'll talk.

Sorry to those who are experiencing/ will be experiencing layoffs.

[Tim]

I don't mean to denigrate the fact that more non-retail partners are out in the cold, by the way. I'm just choked at the constant double-speak. Nobody should believe in this company anymore.

[Will]

I still don't understand why a corporate jet (or jets) is necessary at ALL.

[beansarefun]

What was the info about subway on the conference call? Can anyone share any info? I am so sorry for all the partners who will lose their jobs... these are tough tough times.

[toker]

Why are the people that are on the front line making money getting benefits cut. The useless DM SM and ASM aren't out their vacation. Starbucks won't be attracting the same level of employee. Quality is going down the toilet. I might as well work at McD.

[potential scc layoff-ee]

@Freed peaberry: the list hasn't even been decided on yet, so it's definitely not available to be posted or released. As with the July store closures, I'm sure the locations affected will not know until a month or so before their doors close. Not all of those stores have been closed yet, so I'm sure this round will be an ever-developing list as well.

@Sample cup: the Subway deal (although I didn't hear the call, I can presume based on kitchen conversations) is a deal through the Foodservice division, and I believe it's an SBC agreement for some of their stores.

@ol-skool-sbc: I'm feeling your grief - I too came from Seattle Coffee Company and have cringed at the decline of both brands. I was never a true lover of SBC, but TI has broken my heart. To see it relegated to Foodservice (on occasion), and grocery (primarily) is almost cruel. I still believe SBUX saw it as too much of a threat, despite the fairly severe difference in cafe atmosphere and coffee quality. Such a shame.

[K-Dog]

Melody, I doubt Howard had the heart to answer that final question himself.

[Herman M.]

Can't you see? He is taking us back to our roots. Back to 1995 when there were less than 700 stores and the big expansion call was for "2000 by 2000". I choose 1995 as that was the summer we introduced the frappucino, and don't see that evil critter ever going away.

[Venti Urnex Latte]

So Howard will be making a PART-TIME BARISTA'S SALARY!!!!

He will be making $10K a year, the minimum to keep his benefits.

That is almost exactly what a half-time benefits-eligible barista makes in my city.

A lot of partners used their vacation days to make the benefits cutoff. With the reduction in vacation, they will either have to work more hours or just miss the benefits eligibility.

So is Starbucks protesting too much about the importance of keeping health benefits for retail hourly partners? Will that be the final thing to go? Once it goes -- IF it goes -- that will be the end of Starbucks as we know it. That is THE ONE THING that distinguishes Sbucks from every other retail job.

[Frank Sumatra]

This is pretty random, but yesterday I walked past a copy room at the SSC and there were two life-sized cutouts of former CEO Orin Smith in a recycle bin. Sign of the times I guess...

i agree with the license store comment. they bring the company stores down.

[Beaux]

Wow, this is bad. But hey it's quite simple. Economy sucks; companies do whatever they have to to survive. Obviously, Starbucks is still here and is damn well trying to stay. I mean, Howard's salary is now less than mine. And I am a SS. I thinks that's quite a sacrifice. If he's willing to do that, I am willing to sacrifice a little too such as not having a personal day, hoping things will get better. So for those Starbucks haters, don't bitch about our $5 dollar lattes. Go to a gas station. You are not worthy of our coffee. For those laid off, hope things get better for you.

[snagger]

Frank,You should have strapped one on and run up to HR!

I've worked for this company for a long time and all I see in the "new" partners is ME, ME, ME! No wonder our customer service and attention to coffee knowledge and quality is deteriorating! When you start to actually give at least 90% for the job you are hired for, maybe then we will start to see our customers loyalty again! The ones who actually come for the coffee we sell which up until the point it gets to the store is great until the baristas start to work with it and don't give a damn about sampling, getting to learn the coffee, taking the time to brew french presses, and keep the brew on our urns fresh! Time there is but holding up the counter like I see in many stores and talking has never been part of the job requirement! all your angry baristas, get off your high horse and actually do the job you were hired to do! All the damn good benefits we have are supposed to be rewards for doing a good job, they are not guaranteed for 1/2 ass jobs!

[Beaux]

damn right!

[lightatendoftunnel]

I commend Howard for taking a $10000 salary. He does deserve more... it was his vision and guidance that built defined a culture and he deserves personal reward.
Also, no one has mentioned anything about the anouncment to sell 2 of 3 coporate jets. That too is a big deal.

[snagger]

Me,Me,Me--Sbux has always been about status; that's what brought people in the door.From the other side it was being the employer of choice. Self respect and dignity requires security and compensation.

[dvw]

I do not understand why closing underpreforming stores is "bad". It's making little to no money, why should that store stay open? I also do not understand why people think this is only happening at Starbucks. I don't remember the movie "Starbucks: The High Cost of High Prices" being made. Do you?