Coffee Crisis? Starbucks Closing 600 Stores

Effects of Economic Woes Hit the Coffee Shop Chain

With the coffee sitting around getting cold at hundreds of Starbucks
across the country, the nation's largest coffee chain announced today
it will close nearly 600 stores that were not profitable.

Starbucks Corp. has announced it's closing 600 underperforming coffee stores in the U.S.

(AP Photo)

As
national economic growth grinds to halt, worried consumers have saved
their pennies (more likely, $5 bills, if we're talking about those
mocha whip fraps) and visited Starbucks less frequently. 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.

Previously, Starbucks had announced it would close 100 poorly
performing stores. But with nearly 600 stores now slated to be closed,
it is almost as if Starbucks faces its own version of the collapse in
the housing market.

More than two thirds of the stores to be shuttered opened since the
start of 2006, with the largest number opening in 2007, Bocian said.
That sounds eerily similar to the same period when there was a surge in
home sales financed with risky loans, many of which are now in default
or in foreclosure.

In April, Starbucks CEO Howard Schultz told Terry Moran in an
interview for "Nightline" that the coffee business had been affected by
the mortgage crisis.

"I
think people also underestimate the impact of the economy right now,
which is very acute, I think more significant than people realize,"
Schultz said. "I was in California last week and I got a tour of the
impact of subprime issues and the foreclosures around Starbucks stores,
and it was stunning to me just how many empty houses there were."

The company would not disclose the exact locations of the stores that will start closing starting later this year.

"The stores targeted for closure are spread relatively
proportionally across all major U.S. markets," Starbucks spokeswoman
Deb Trevino said in an e-mail to ABC News. "Consideration was given to
the impact of current and anticipated economic trends in making this
decision."