Starbucks profit disappoints again as customers cut back

This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.

Wall Street figured on a lousy earnings report from Starbucks Corp., but not quite this lousy.

The coffee retailer’s shares have slumped in after-hours trading, in the wake of the company’s report that store traffic and average customer spending slid in the quarter ended Sept. 28.

And that was before the worst of the financial market meltdown hit in October, and retail sales in general fell off a cliff.

Seattle-based Starbucks said total sales were $2.5 billion in its fiscal fourth quarter, up 3% from a year earlier.

But U.S. same-store sales slumped 8%, which Starbucks blamed on ‘deteriorating traffic trends in the U.S. and a decline in the average value per transaction.’

After charges to close stores and pare its workforce, the company earned just $5.4 million, or 1 cent a share, in the quarter, down from $158.5 million, or 21 cents, a year earlier.

Excluding restructuring costs, Starbucks earned 10 cents a share in the quarter. That was 3 cents shy of analysts’ consensus estimate.

For the full year the company earned $315.5 million, or 43 cents a share, compared with $672.6 million, or 87 cents, in 2007. Sales totaled $10.4 billion, up 10% from 2007.

The stock, already down 50% this year to $10.20 at the closing bell today, fell as low as $9.75 after hours and recently was trading at $9.90. The 52-week closing low was $9.59 on Oct. 27.

Starbucks said it expected the current quarter, ending Dec. 31, to be its ‘toughest’ of the new fiscal year in terms of year-over-year profit comparisons. But in a conference call with analysts after today’s report, the company said October ‘did not show further deterioration’ in sales or traffic compared with the fourth quarter, although it didn’t provide specific numbers. The hint there was that things may be bottoming.

And Chief Executive Howard Schultz promised an earnings pickup in the new year, saying that ‘despite a global economic environment which shows no immediate signs of improvement, the steps we took in fiscal 2008 position us to deliver earnings per share growth in fiscal 2009’ -- albeit from this year’s depressed levels.

The company has been slashing costs to cope with consumers’ new frugality. In July, Starbucks announced plans to close about 600 poorly performing U.S. stores.

Even so, you probably won’t have trouble finding that latte. The total U.S. store count was 11,567 as of Sept. 30. Foreign stores totaled 5,113.