Starbucks reports second quarter profit drop

A decline in customer visits has led to a 28 per cent fall in second quarter profits for US-based coffee retailer Starbucks.

The company said although revenues increased by 12 per cent to $2.5 billion (£1.26 billion) over the three months to March 30th 2008, net earnings totalled $108.7 million (£54.7 billion) compared to $150.8 million (£75.9 million) for the same period a year ago.

Earnings per share (EPS) for the quarter was $0.15 (7.5p), down 21 percent from last year's $0.19 (9.6p) per share.

Seattle-based Starbucks said earnings per share were impacted by charges relating to restructuring, which cost the company approximately $0.03 (0.15p) per share.

In addition, lower than expected revenue was driven by a mid-single-digit decline in US comparable store sales, driven by decreased traffic.

The company's core market is the US, which contributes 77 per cent of the group's revenues.

"Fiscal 2008 is a transitional year for Starbucks and, while our financial results are clearly being impacted by reduced frequency to our US stores, we believe that as we continue to execute on the initiatives generated by our transformation agenda, we will reinvigorate the Starbucks Experience for our customers, and in doing so, deliver increased value to our shareholders," said Howard Schultz, chairman, president and chief executive.

The company has slashed the number of planned new store openings as US customer numbers dwindle and has refurbished existing stores.

Starbucks said it plans to open significantly fewer new stores in the US, over the 2009 to 2011 period, to less than 400 net new stores per year, opening approximately 250 company-operated stores in each of the three years.

However, the company plans to continue its international expansion, opening approximately 1,050 in 2009, 1,150 in 2010, and 1,300 in 2011. Starbucks intends to expand its international division from approximately 30 per cent to over 40 per cent of the global store portfolio.