Starbucks initiates turnaround strategy; retailer to scale back stores

Source: Food and Drink Digital

Date :1/31/2008 3:49:31 AM

Starbucks said Thursday it will close some of its stores and discontinue sandwich sales; aimed at restoring the beleaguered coffee retailer’s “coffee authority”.

In a statement, chief executive Howard Schultz, said Starbucks would close 100 underperforming locations in the United States while scaling back the rate of store openings domestically. At the same time, the group will move more aggressively to open stores overseas, where business remains robust.

Turnaround

Mr Schultz, who this month resumed the role of chief executive of the coffee retailer he founded and ran until 2000, said Starbucks had decided to stop selling heated breakfast sandwiches, chiefly because they interfered with the aroma of coffee.

He added that the move was “just one example” of changes under way “that will substantially change the retail experience in the US”.

Same-store

The company will also no longer report quarterly comparable sales figures for more than 6,000 company-owned US stores, as Mr. Schultz proceeds with his turnaround plan.

He said the company’s decisions had been too driven by improving same-store sales rather than consumer needs and that same-store sales numbers would be “erratic” during the transformation.

The announcement came as Starbucks, whose main rivals include McDonald’s and Dunkin’ Donuts, reported anemic sales growth of one percent at stores open at least a year, the worst three-month performance in the company’s history.

Same-store sales for American stores declined one percent.

January 31, 2008