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Starbucks has no plans to cut back on its expansion

From Bloomberg News

Chairman Howard Schultz said Wednesday that Starbucks Corp. could add 10,000 coffee shops in the next four years, knocking down speculation that he would slow the chain’s expansion.

Starbucks, founded in 1971, will double in size within five years, Schultz said at the annual meeting in the company’s hometown of Seattle. Starbucks had 13,168 outlets at the end of 2006.

Schultz wrote a memo in February that said service had deteriorated and the Starbucks brand was being watered down. That sparked speculation that he would curtail expansion to restore practices such as making espressos by hand instead of by machine.

“I have written hundreds of memos, and there is a common thread of self-examination, pursuit of excellence, a willingness to constantly challenge yourself and not embrace the status quo,” said Schultz, who has been with the company for 25 years.

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“It was not a memo that was intended to be in any way critical of or demonstrate a lack of faith in management,” he said.

Shares of Starbucks gained 89 cents Wednesday to $32.27.

Chief Executive Jim Donald said that by 2013 Starbucks would get 80% of its coffee from suppliers who had agreed to meet environmental standards for sustainable agriculture.

Donald affirmed the company’s profit forecast of 87 to 89 cents a share for all of 2007 and sales growth of 20%.

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Starbucks is facing increased competition from Dunkin’ Donuts and McDonald’s, which introduced a premium coffee last year. Last month, Consumer Reports magazine ranked McDonald’s coffee ahead of Starbucks, saying it tasted better and cost less.

McDonald’s Corp. said Wednesday that it expected to take market share from U.S. specialty coffee retailers as it prepared to expand its offerings of lattes, cappuccinos and iced coffees.


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