It was bound to happen. Sooner or later, Starbucks had to stop being the juggernaut force that was seen on every street corner and in every city. There was a time when it seemed as if there was a Starbucks every five feet and although it didn’t seem like it back in the glory days, the time had to come when people simply would stop going to Starbucks.
When the economy was riding high, Starbucks was in a sweet position. It was such a force, in fact, that it was the subject of mockery in such mainstream venues as the Austin Powers movies and the Shrek franchise.
But, when the economy goes south, it’s only natural for people to think about where they can cut costs – and one of those measures is to stop paying top dollar for a cup of coffee. When someone is worried about whether or not they’ve got a job next week, the last thing in the world they’re going to want to do is spend five dollars for a cup of coffee.
And so, the Starbucks juggernaut slowly began to lose power – and steam.
When the bell sounded on Wednesday, Starbucks announced that it was going to close the doors on 300 stores – and cut approximately 7000 jobs in the process.
Back in July, Starbucks announced the closing of about 650 stores, and these additional closings emphasize the financial straits the caffeine empire currently finds itself in.
Chief Executive Officer Howard Schultz warned in December that the company’s earnings weren’t going to be as high as predicted, and explained that in a tight economy, premium coffee simply wasn’t going to sell as well as it did when times are less tough.
To give him credit, Schultz asked the board to cut his salary to about ten thousand dollars, which is the bare minimum required to keep him and his family with health benefits. While many other executives are still looking for ways to pad their lifestyles, Schultz appears to be taking things seriously – and doing whatever it takes to help out his company.
Sales at Starbucks stores that have been open for at least a year were down ten percent, which is a significant number.
There are some who wonder, however, if Starbucks is cutting enough jobs, or if they are simply proceeding at a slow pace, hoping that there will be an upswing. Patty Edwards, a retail analyst with Storehouse Partners in Seattle, commented in an interview with Bloomberg News, “I’m hoping 300 stores is enough, and that they’ve done what they need to do. Slow drip, even in coffee, isn’t necessarily the best thing. Sometimes you just need to get the pain over with.”
“Starbucks to Cut 6,700 Jobs After Earnings Fall 69%” by Courtney Dentch (Bloomberg News, 28 Jan 2009)
“Starbucks Brews A Bitter Cup” by Miriam Marcus (Forbes.com, 28 Jan 2009)