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Starbucks Cuts 600 Jobs

BY CSA STAFF

New York Starbucks Corp. said on Thursday it would eliminate 600 jobs as it works to turn around stagnating U.S. coffee shops in the face of a weak economy. Chief executive Howard Schultz, who made the announcement in an e-mail to employees, is slated to share details of the company’s strategy at a shareholder meeting on March 19.

Starbucks laid off 220 employees on Thursday. One-third of them worked in Seattle, spokeswoman Valerie O’Neil said. Those employees performed a variety of duties from finance to design and marketing.

The company has also eliminated an additional 380 open positions, O’Neil said. None of the cuts affect people working at Starbucks outlets, she said, adding that Starbucks has 170,000 employees.

 

Sales at established U.S. Starbucks outlets fell last quarter, and the company has already announced plans to expand overseas and close underperforming U.S. stores.

UBS Equity Research analyst David Palmer called the move a visible step to remove bureaucracy and cost.

“We expect earnings to ramp through the year as unit growth slows, innovation improves (and) dairy pressures abate,” Palmer said in a client note.

McAdams Wright Ragen analyst Dan Geiman said the layoffs were expected.

“I don’t think it’s a surprise at this point,” he said.

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Whole Foods reports 31.4% 1Q sales increase

BY CSA STAFF

AUSTIN, Texas Whole Foods Market today reported that first quarter sales 31.4% to approximately $2.5 billion. Comparable-store sales increased 9.3% on top of a 7% increase in the prior year. Identical-store sales, excluding five relocated stores and three major expansions, increased 7.1% on top of a 6.2% increase in the prior year.

According to Whole Foods, net income was approximately $39.1 million, and diluted earnings per share were 28 cents. The company estimates the negative impact on net income from Wild Oats was approximately $11.9 million, or 8 cents per diluted share, in the quarter.

“We realize there are a lot of questions out there about how a slowing economy might impact our sales. Historically, our sales have been highly resilient during economic downturns. We attribute our strong sales to many factors, including our loyal core customers and their dedication to a natural and organic lifestyle, our high percentage of perishable product sales, and our extensive selection of high-quality prepared foods that attracts customers trading down from restaurants,” said John Mackey, chairman, ceo, and co-founder of Whole Foods Market. “In addition, we sell a high percentage of relatively small-ticket items, and we are better positioned today than we ever have been from a value perspective. Given our prior experience, strong year-to-date comps, easier year-over-year comparisons, and the increased number of new stores entering the comp base, we are confident in reaffirming our comp guidance of 7.5% to 9.5% for the fiscal year.”

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Safeway reports slight 4Q earnings drop

BY CSA STAFF

PLEASANTON, Calif. Safeway today reported that net income for its 2007 fourth quarter fell to 301.1 million from $307.9 million in the fourth quarter of 2006. Diluted earnings per share were 68 cents in the fourth quarter of 2007 compared to 69 cents in the fourth quarter of 2006. The company noted that diluted earnings per share in the fourth quarter of 2006 was increased by 8 cents due to various favorable tax items.

The company reported that total sales increased 6.8% to $13.4 billion in the fourth quarter of 2007 compared to $12.5 billion in the fourth quarter of 2006. Safeway said that contributions from Lifestyle stores, increased fuel sales and an increase in the Canadian dollar exchange rate drove this increase. Identical-store sales increased 4.4% in the fourth quarter of 2007. Excluding fuel, identical-store sales increased 2.7%.

“We are pleased with our performance in the fourth quarter of 2007,” said Steve Burd, chairman, president, and ceo. “Excluding the 8 cents tax benefit in the fourth quarter of 2006, our diluted earnings per share increased by 11.5%.”

Net income for the year 2007 was $888.4 million ($1.99 per diluted share) compared to $870.6 million ($1.94 per diluted share) in 2006. Sales increased 5.2% to $42.3 billion in 2007 from $40.2 billion in 2006 primarily because of Safeway’s marketing strategy, Lifestyle store execution, increased fuel sales and an increase in the Canadian dollar exchange rate. Identical-store sales, excluding fuel, increased 3.4%.

For the fiscal year 2008, Safeway expects diluted earnings per share to be in the range of $2.25 to $2.35 per share. Identical-store sales, excluding fuel, are expected to grow 3% to 3.2%.

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