Starbucks Corp. said nearly 7,000 employees may lose their jobs in a new round of store closings and cost cuts as it reported Wednesday that the chain's profit dropped 69 percent in its fiscal first quarter.
The company plans to close 300 underperforming stores around the world by the end of the fiscal year in addition to 600 it already planned to close in the U.S. The company has already closed 384 of those stores.
The additional closures could result in the loss of 6,000 in-store jobs. Starbucks also plans to lay off about 700 nonstore employees.
It also has reduced the number of new stores it plans to open.
The cuts and changes will result in about $500 million in savings in fiscal 2009, the company said.
Edward Jones analyst Jack Russo said the cuts make sense given the decline in Starbucks' sales in recent quarters.
“This is going to be a transition year,” Russo said. He said the company will have to “claw their way back.”
Wall Street had largely expected Starbucks to report a dismal performance for the quarter, which ended Dec. 28, because it had warned last month that slow sales likely would cause it to miss analysts' estimates.
Heeding the company's warning, analysts lowered their average expectation from 22 cents per share to 17 cents per share.
But the company still fell short, with net income of $64.3 million, or 9 cents per share, down from $208.1 million, or 28 cents per share a year earlier.
Excluding charges from closing the 600 U.S. stores and 61 stores in Australia, the company said it earned 15 cents per share in its first quarter.
Revenue fell from $2.77 billion to $2.62 billion, while analysts had predicted revenue of $2.70 billion.
The revenue drop stemmed from a 9 percent decline in same-store sales, or sales at locations open at least a year, considered a key gauge of restaurant and retail performance. That dip was worse than the company's fourth-quarter decline of 8 percent.
The company's U.S. same-store sales dropped 10 percent in the first quarter.