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Retail Changes Key To Starbucks Closings

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Retail Changes Key To Starbucks Closings

Business

Retail Changes Key To Starbucks Closings

Retail Changes Key To Starbucks Closings

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Starbucks' retail woes may indicate a larger slump in the retail sector. The coffee chain announced this week that it's closing about 600 stores, but it's not the only chain slimming down to meet hard economic times.

Retail consultant Howard Davidowitz says consumers are going to get so scared they will start saving and that fear will also lead them them to spend less.

Starbucks Store Closures To Affect 12,000 Workers

Starbucks Store Closures To Affect 12,000 Workers

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Starbucks will close more than 600 shops in the U.S. in the coming months, which analysts say is a consequence of the chain's spreading too far, too fast.

Seattle-based Starbucks did not say which stores will be closed, only that they are spread throughout the country. But it did say most of the outlets on the chopping block are new Starbucks stores that have been open only since 2006.

In a webcast conference call late Tuesday afternoon, Chief Financial Officer Peter Bocian said the company plans to close nearly 20 percent of these newer outlets.

"We 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," Bocian said.

Many of the stores slated for closure are near other Starbucks stores.

Some analysts had warned about company cannibalism — or stores competing against one another for sales. The culprits behind Starbucks' woes are overexpansion, a weak economy and lots of competition.

Starbucks has been struggling for some time. Its stock price, which closed at $15.62 Tuesday, is half of what it was a year ago.

Earlier this year, the man who essentially made Starbucks, Howard Schultz, returned to the company as the hands-on CEO.

The closures are the latest moves Schultz and the company have taken to try to perk up the company's outlook.

About 12,000 workers, or 7 percent of Starbucks' global work force, will be affected by the closings. The company said it will try to relocate workers to nearby stores.

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