New York City Starbucks Corp. plans to slash nearly 7,000 more jobs during a new round of store closures and other cuts, the company said as it reported Wednesday a profit drop of more than two-thirds in its fiscal first quarter.
The chain plans to close 300 underperforming stores around the world — including 200 in the United States — by the end of the fiscal year in addition to the 600 U.S. stores it began closing last summer.
The new store closures could result in the loss of 6,000 jobs, but the company said it will try to offer employees transfers to other nearby locations.
Starbucks also plans to lay off about 700 non-store employees and 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.
The company reported a net income of $64.3 million for its first quarter, down 69% from $208.1 million.
Revenue fell to $2.62 billion from $2.77 billion, while analysts had predicted revenue of $2.70 billion. The revenue drop stemmed from a 9% decline in same-store sales.
The company's U.S. same-store sales dropped 10% in the first quarter. The company said its international business suffered the most in Canada and the United Kingdom.
CEO Howard Schultz said Starbucks will offer customers more value through breakfast "pairings" at new prices but declined to offer any specifics.
In addition, Schultz asked the company's board of directors to cut his salary last week. The board agreed to pay Schultz just $10,000 in base salary for fiscal 2009, including health insurance and other benefits.
Schultz, whose salary was $1.2 million in 2008, still could take home millions in the form of stock options. In the last fiscal year, he received stock options worth $7.8 million when granted, which helped boost his total compensation near $10 million.
The company said it plans to open only 140 new stores in the United States in fiscal 2009, down from its previous target of 200. Overseas, it will open 170, down from the 270 it had planned to open.
Starbucks added it would sell one of its two corporate planes and will reach out to landlords to try to negotiate lower rents for its stores.
The company also said it will not provide any sales or earnings guidance "given the uncertainty in the global consumer retail environment."