Starbucks closures just the beginning
July 2nd, 2008 | by admin |Last Updated: July 2, 2008: 9:56 AM EDT
Starbucks to close 600 stores
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NEW YORK (AP) — Starbucks Corp.’s plan to close several hundred stores is a step in the right direction but analysts say it may not be enough to solve the problems facing the company.
Starbucks did not give details about which locations will be closed, but Stephen Kron of Goldman Sachs said he thinks the closings will be weighted to areas that have been hit the hardest by slumps in the housing industry and the broader economy.
Baird analyst David Tarantino said the move "suggests the brand may be approaching saturation in some markets," and the company’s efforts to stabilize sales at its older locations could take time to work.
Deutsche Bank analyst Marc Greenberg said Wednesday that Starbucks may have to make further cuts because it is still opening a large number of stores in overseas markets like Western Europe, where growth is slowing down and profit margins are lower.
The company said late Tuesday that it will close 600 company-run U.S. stores over the next year. The stores were not profitable, and most were located near another Starbucks. Most were opened in fiscal 2006 later. Starbucks also plans to open fewer stores in fiscal 2009.
While the move is expected to help improve the company’s profit margins and sales at its older stores, analysts still believe lower consumer spending will hurt Starbucks into next year.
All three analysts kept "Neutral" ratings on the stock.
A Starbucks spokeswoman said the company will not reveal which stores will be closed or give details on which regions might be most affected by the closings.
Starbucks (SBUX, Fortune 500) shares are slightly higher in early trading, but are still at/near their lowest level since late 2003. The stock is trading below $16 a share. The had hit $40 in 2006. 
First Published: July 2, 2008: 9:53 AM EDT
