If you're looking for (further) proof that Americans are keeping a tighter grip on discretionary income, coffee behemoth Starbucks is shutting down a staggering 600 stores in the United States alone.
The future doesn't look too bright, either:
The Seattle-based premium coffee company also announced Tuesday it expects to open fewer than 200 new company-operated stores in the United States in fiscal 2009.
The company says it will try to place workers from closed stores in remaining Starbucks.
This is a 600% increase in the number of stores that Starbucks had expected to close earlier this year. Remember the nationwide, employee training-oriented shutdown last February?
Starbucks has been down on its luck lately -- it recently announced plans to shut down 100 slow stores and cut 600 jobs -- and tonight's event, to hear the company tell it, is a kind of zen deal aimed at getting 135,000 in-store employees back into the spirit of Starbucks.
Guess it didn't stand a chance against the forces of macroeconomics.
There's more from ABC News:
In the three months that ended on March 30, Starbucks profits fell 28 percent compared with the same time a year earlier.... "We believe absolutely we are seeing a major impact from [the] economy," Starbucks CFO Pete Bocian said in a conference call with investment analysts today.
The poor economy and collapse of consumer confidence certainly play their respective parts here, but don't discount how much Starbucks overexpanded its empire. And with empire comes hubris.
From just nine months ago:
As of July 1 (2007), there were 14,396 Starbucks locations worldwide. The company's goal is to eventually reach 40,000 locations worldwide. During the third quarter, 668 Starbucks locations opened, a company record.
Think about how quickly this "correction" blind-sided Starbucks. Less than one year later, Starbucks will close just about as many stores as it opened in the third quarter of 2007.
Its philosophy of expansion ultimately proved to be a self-serving pipe dream:
While many retail and restaurant chains worry about having too many locations, Starbucks believes it can build or create a market demand by adding them.
Which may work when people have 5-dollar bills burning holes in their pockets, but when the choice is between gourmet coffee and regular coffee or, more likely, between gourmet coffee and gasoline, the choice is easy.
I'll admit to some schadenfreude here, having waited for this to happen for more than five years now. But it's short-sighted to feel this way, since so many will be adversely affected by this (not talking about Howard Schultz and his cronies here).
Here's to hoping those laid-off Starbucks employees can find work with local, independent coffeehouses that better support their respective communities. It's unfortunate that working folks often pay the heaviest price—relative to their total income in lost wages and benefits—for executive blunders.
Update: It looks like someone broke the comments by adding some video clips. Could those possibly be removed? I know the actual commenter doesn't have the authority to do it.