Novice Investing - Starbucks Saving Some Bucks

Date: Tuesday 13th 2008f May 2008 07:33:14 AM

Starbucks Saving Some Bucks - 02/24/2008

By: Novice Investing Staff

In the latest move by Starbucks Corp. (SBUX), management announced that it is eliminating 600 jobs mainly in the so-called field operation or offices that support the Starbucks stores. No cuts will be coming from Starbucks' retail stores and about one third of the cut is happening in the Starbucks' Seattle headquarters office. With total employees of 170,000 worldwide, much of it in the United States, this latest cut is a small drop in the bucket. As a result of this elimination, Starbucks is expected to save $ 15 to 20 Million. Further, as part of the announcement, Starbucks announced that on Tuesday it will be closing all of its stores from 5.30 pm to 9.30 pm local time to retrain its 135000 store workers. Thus, February same store sales may be affected by this closures.

We do not have much updates from Starbucks since it last announced 4th quarter earning result back in late January 2008. At the time, Starbucks announced that it will remove Sandwich breakfast from its stores which contributes to 3% of total revenue. Earning per share will be affected by $ 0.23 per share, which is a sizable amount considering that the company earned $ 0.93 per share last year. Starbucks expected that earning loss from its Sandwich menu will be more than offset by the increase of coffee sales. It reasoned that the sale of Sandwich has distracted the odor of its fresh coffee.

Meanwhile, Starbucks shares barely budge compared to a month ago. Lately, Starbucks shares is closed at $ 18.25 per share. Serious investors of Starbucks should watch same store sales over the next few months to determine whether its decisions to delist its sandwich menu is the correct move or not.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Starbucks Corp. (SBUX) or any other securities.

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