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Starbucks closes Australia coffee shops, lays off 1,000: Throttling back

When big cuts precede the announcement of quarterly earnings, I can't help but expect bad things in the earnings release. Today's twin announcements by Starbucks (NASDAQ: SBUX); first, that the company is shuttering most of its 84 Australia stores due to "challenges unique to the Australian market"; and second, that the company was cutting about 1,000 nonstore jobs; surely make it a likelihood that the fiscal third quarter was not pretty. There was not an estimate of the total job to be cut between Australian store closings, the 600 U.S. closings, the previously-announced reduction in headquarters staff and today's announcement; but it must total several thousand.

Starbucks hasn't offered any guidance for the quarter, but analyst consensus is that the company will earn profit of 18 cents a share on revenue of $2.62 billion. Analysts seem to agree that Starbucks' same-store sales, which declined in the fiscal second quarter, will decline further ("mid-single digits" according to Robert W. Baird analyst David Tarantino).

The fact that Starbucks is laying off thousands and shuttering hundreds of stores tells me the company is cleaning house in a big way due to startlingly poor results; but will investors be pleased or pessimistic about the company's now-slimmer future?

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Last updated: August 30, 2008: 09:00 AM

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