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Starbucks Announces Store Closures

ROBERT SIEGEL, host:

Starbucks will close 600 stores around the country by early next year. That's hundreds more than the coffee giant forecast just a few months ago, and the company is scaling back its expansion plans. It's a clear indication that the days of Starbucks' breakneck growth are over.

From Seattle, NPR's Wendy Kaufman reports.

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WENDY KAUFMAN: The numbers tell much of the story. The 600 store closures represent about eight percent of company-owned stores in the U.S., they're spread across the country and most are located near other Starbucks stores. As the coffee giant blanketed many cities with stores on every corner, some analysts began talking about cannibalism - at what point do you simply steal sales from a neighboring Starbucks store?

The vast majority of the stores to be closed are relatively new. In a Webcast conference call late this afternoon, the company's chief financial officer, Pete Bocian, said 19 percent of all stores opened since the beginning of 2006 will be shuttered later this year and early next.

Mr. PETE BOCIAN (Chief Financial officer, Starbucks Corporation): These stores were not profitable and that we expect this action will be a good part contributing to us making our long-term targets.

KAUFMAN: In an effort to drive profit targets, the company will slow expansion plans. For 2009, the company expects to open fewer than 200 company stores in the U.S.

Bob Goldin of Technomic, a food industry research and consulting firm, says he wasn't all that surprised that Starbucks is scaling back in a big way.

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Mr. BOB GOLDIN (Executive Vice President, Technomic, Inc.): They're victims of overexpansion, intensified competition, and a very tough economy.

KUAFMAN: He cites competition from McDonald's, Dunkin Donuts, and lots of other places. But adds, that as Starbucks became ubiquitous, it lost a lot of cache. Starbucks has been struggling over the past 18 months or so; the stock is worth roughly half what it was worth a year ago. That tumble occurred even before the overall market went south.

Wendy Kaufman, NPR News, Seattle. Transcript provided by NPR, Copyright NPR.