Starbucks earnings fall 77% in Q2Starbucks earnings fall 77% in Q2

Lisa Jennings

SEATTLE Despite gaining some traction from cost-saving and traffic-boosting efforts and seeing a slight improvement in same-store sales, Starbucks Corp. Wednesday reported a 77-percent decline in second-quarter earnings.

For the quarter ended March 29, the Seattle-based coffeehouse giant recorded a profit of $25 million, or 3 cents per diluted share, compared with $108.7 million, or 15 cents per diluted share, for the same period a year ago.

Consolidated revenues for the quarter were $2.3 billion, down 7.6 percent from $2.5 billion for the second quarter of 2008, as cash-strapped consumers curbed their latte habits.

Same-store sales fell 8 percent during the quarter, as the number of customer transactions dropped 5 percent and the average value per transaction declined 3 percent, the company said. Still, the same-store sales decline showed some improvement over the 9-percent slide reported during Starbucks’ first quarter this year.

The 16,000-unit chain is still experiencing the negative impact of its ongoing restructuring efforts, which have included the closure of more than 800 underperforming stores in the United States since last year, as well as the shedding of roughly 1,700 jobs. The closings of 123 domestic stores, lower real estate values and the reduction in positions resulted in restructuring charges of $152.1 million during the quarter, officials said.

In the United States, where Starbucks operates 7,035 stores, net revenues were down 6.8 percent, to $1.8 billion.

Howard Schultz, Starbucks chairman, president and chief executive, said the chain has begun to see traction from cost reductions and customer-facing initiatives enacted in recent months, including the sale of its new Via Ready Brew instant coffee and value-positioned “breakfast pairings,” or combinations of foods and coffee sold for under $4.

“Our focus on delivering value while staying true to the premium quality and values of the brand is paying off,” said Schultz.

During the second quarter, the company delivered $120 million in cost savings, the company said, exceeding the goal of $100 million for the quarter, and bringing year-to-date savings to $195 million.

Schultz has pledged to reduce costs by $500 million by the end of the fiscal year. On Wednesday, the company estimated cost savings would reach about $150 million in the third quarter, and another $175 million in the fourth quarter.

Contact Lisa Jennings at [email protected].