Is Starbucks' bad fortune good news for local coffee shops?
Local independent coffee shop owners could see a boon from Starbucks Corp.'s decision to close 600 stores nationwide, although it's unknown which local stores will be axed.
The Seattle-based retail coffee giant said Tuesday afternoon that certain unprofitable stores -- 70 percent of them having been opened between early 2006 and now -- will shut their doors this year and into 2009, leaving 12,000 employees without jobs.
Dozens of Starbucks stores opened across San Bernardino and Riverside counties during the housing boom and in its aftermath.
With yesterday's news, some residents are no doubt feeling they may have to pick up a cup of Joe at the Starbucks across town or the mom-and-pop coffee shop around the corner in the future.
"It's the buzz," said Morris Siancuri about Starbucks' announcement.
Siancuri helps manage Last Drop Coffee House in downtown Claremont, a coffee shop with loyal customers.
"It's good news for us, but it's also bad news for the people who'll lose their jobs," he said. "My cliental doesn't support Starbucks anyway."
While Starbucks has forced several small coffee retailers either out of business or back to the strategic drawing board, the multi-million-dollar company's pricey menu for roasted grounds has actually been a good thing for some independent owners, Siancuri said.
Christian Carrizales, manager of Coffee Nutzz in Rialto, agrees. He says most of his cliental are either existing or ex-Starbucks customers.
"If one were to close near us, it might give us a chance at the people that haven't given us a chance," he said.
--matthew.wrye@inlandnewspapers.com
Look below to read the Associated Press story on Starbucks Corp.'s decision to close 600 stores:
Starbucks to close 600 US stores, rein in growth
SEATTLE (AP) -- For a decade it appeared there was no such thing as too many Starbucks for U.S. coffee drinkers, whose willingness to buy its $4 lattes and dark drip brews rationalized a second green-and-white mermaid awning just down the street -- and sometimes even a third.
But in a sign that those days are over, Starbucks Corp. announced Tuesday it will close 600 company-operated stores in the next year as the faltering U.S. economy hastened the pain caused by the company's own rapid expansion.
Starbucks shares, which have been falling steadily for nearly two years, jumped 72 cents, or 4.6 percent, in extended trading after the announcement. They had lost 12 cents to close Tuesday at $15.62.
Seattle-based Starbucks did not say which stores will be closed, only that they are spread throughout the country. But it did say 70 percent of those slated for closure had opened after the start of 2006.
To put it another way, Starbucks is closing 19 percent of all U.S. company-operated stores that opened in the last two years, Chief Financial Officer Pete Bocian said during a conference call.
About 12,000 workers, or 7 percent of Starbucks' global work force, will be affected by the closings, which are expected to take place between late July and the middle of 2009, spokeswoman Valerie O'Neil said.
O'Neil said most employees will be moved to nearby stores, but she did not know exactly how many jobs will be lost. Starbucks estimated $8 million in severance costs.
In total, the company forecast up to $348 million in charges related to the closures, $200 million to be booked in the fiscal third quarter ended June 30. Starbucks reports third-quarter results at the end of July.
The company had previously planned to shut 100 stores. The 500 more that will be closed had been on an internal watch list for some time. They were not profitable, not expected to be profitable in the foreseeable future, and the "vast majority" had been opened near an existing company-operated Starbucks, Bocian said.
Some analysts had wondered whether Starbucks' explosive growth in the U.S. would come back to haunt it as the market became saturated.
But before Tuesday, the company avoided acknowledging that saturation was an issue and pinned weak financial results and adjustments to new store openings on the economy.
During the call, Bocian said that between 25 and 30 percent of a Starbucks shop's revenue is cannibalized when a new store opens nearby, and that the closures should help return some of that revenue to the remaining stores.
Bocian said there aren't a material number of stores left on the watch list, but that the company will hold remaining stores to the same standards.
Starbucks still plans to open new stores in fiscal 2009, but on Tuesday it cut that number in half to fewer than 200. The company did not adjust its plan to open fewer than 400 stores in 2010 and 2011.
"We believe we still have opportunities to open new locations with strong returns on capital," Bocian said.
During the conference call, the CFO echoed concerns about the economy expressed by Chief Executive Howard Schultz in May, when the company attributed a 28 percent drop in profit to less traffic from U.S. consumers who were feeling the pinch of higher food and gas prices.
At the end of March, there were 16,226 Starbucks stores around the world. The company operates 7,257 of those stores in the U.S. and 1,867 abroad; the remaining 7,102 locations are run by partners who license the Starbucks brand.
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