STARBUCKS Corp's fiscal first-quarter profit rose by less than two percent, as US customers grappling with a soft economy lined up in smaller numbers for a second quarter in a row.
As part of a broad push to revitalize its business, the company said it would open hundreds fewer US stores, close down about 100 poorly performing domestic locations and, from September, quit offering warm egg-and-cheese breakfast sandwiches, which Chairman and Chief Executive Howard Schultz said compete with the aroma of Starbucks' coffee.
This year the company plans to open about 425 fewer domestic stores and 75 more overseas than previously planned, for a global total of 2,150 new stores.
Schultz said the slowdown in US growth will allow the company to make better use of its time, money and staff and could reduce "cannibalization" - easing pressure some stores experience when a new one opens nearby.
The world's largest coffee retailer said sales at stores open at least 13 months - a key measure of a retailer's health - fell one percent in the US as traffic declined three percent. In the second consecutive quarter the company had fewer customers coming into its stores.
Stronger growth overseas helped boost global comparable-store sales a modest one percent, compared with six percent in first quarter of last year.
For the 13 weeks ended December 30, Starbucks posted net earnings of US$208.1 million, or 28 cents per share, up from US$205 million, or 26 cents a share, during the same period a year ago.
Analysts polled by Thomson Financial were expecting a profit of 27 cents per share.
Revenue for the quarter was US$2.77 billion, in line with analysts' estimates and up from US$2.36 billion a year ago.
Starbucks shares fell 75 US cents, or 3.8 percent, to close at US$19.22 on Wednesday, then fell another 28 US cents in extended trading after the results were released. The company's stock is down about 50 percent since late 2006, when it was trading close to US$40 a share.
Sharon Zackfia, an analyst with investment firm William Blair & Co, said the lackluster quarter came as no surprise.
"I think an investor would have had to be living in a cave not to know that the December quarter was bad for the majority of retailers," she said.