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Starbucks will close 600 US coffee shops and eliminate as many as 12 000 jobs, the most in its history, as chief executive Howard Schultz slows the chain’s expansion after it doubled in size in four years.

By Duane Stanford and Joseph Galante

Atlanta and San Francisco – Starbucks will close 600 US coffee shops and eliminate as many as 12 000 jobs, the most in its history, as chief executive Howard Schultz slows the chain’s expansion after it doubled in size in four years.

Starbucks gained as much as 7.2 percent in late Nasdaq trading on Tuesday after saying the cuts amounted to 7 percent of its workforce worldwide. They included full- and part-time employees, it said in a regulatory filing.

Schultz, the former chief executive who regained the post in January, was coming to grips with Starbucks’ declining earnings and the “overgrowth” of the past few years, said Matthew DiFrisco, an analyst at Oppenheimer & Co.

“It shows Schultz is willing to do the tough things that are necessary,” said James Walsh, an analyst at Coldstream Capital Management.

Peter Bocian, Starbucks’ chief financial officer, said the closures would damage long-term revenue projections while helping the company to hit its profit targets.

Starbucks’ sales and earnings have slid as cash-strapped consumers facing record petrol prices cut back on gourmet coffee and other luxuries.

The company still plans to open 200 new company-owned stores by September 2009.

Most of the 600 stores to be closed were opened in late 2005 and 2006, Bocian said.

During that time, more than 50 percent of the new stores had drive-through service.

However, consumers are now driving less because of petrol prices that have soared to more than $4 (R31) a gallon. This is according to separate surveys released in the past two weeks by JPMorgan Securities analyst Himanshu Patel and Mastercard Advisors analyst Michael McNamara.

Most of the Starbucks closures, which include 100 outlets that were announced previously, would be completed by next March.

The stores were located in “all major US markets”, the company said, without naming them. Florida and California are among the largest states affected.

“I think it will be well received by [Wall Street],” said Sharon Zackfia, an analyst at William Blair & Co. “It’s pretty clear they want to enter fiscal 2009 with a clean slate.”