Starbucks axes sandwiches as part of fix

The scent of ham, eggs, cheese and bacon will soon stop competing with the aroma of coffee in Starbucks stores as hot breakfast sandwiches become the first casualty of the company's battle to win back customers.

The sandwiches, which will disappear by this fall, boost a typical store's annual revenue by $35,000, so pulling them off the menu will cost at first. Chairman and Chief Executive Howard Schultz said that proves the company isn't letting the soft economy distract it from committing to big changes that will pay off over the long haul.

"The decision and the courage it takes to remove something when there's pressure on the business — like the sandwiches — is emblematic that we're going to build for the long-term and get back to the roots and the core of our heritage, which is the leading roaster of specialty coffee in the world," Schultz told The Associated Press on Wednesday after the company released its financial results for the first fiscal quarter.

Starbucks Corp.'s profit rose by less than 2 percent, as U.S. customers grappling with a soft economy lined up in smaller numbers for a second quarter in a row.

Sales at stores open at least 13 months, a key measure of a retailer's health, fell 1 percent in the U.S. as traffic declined 3 percent — the second consecutive quarter. Stronger growth overseas helped boost global comparable-store sales a modest 1 percent, compared with 6 percent in first quarter 2007.

For the 13 weeks ended Dec. 30, Starbucks posted net earnings of $208.1 million, or 28 cents per share, up from $205 million, or 26 cents a share, during the same period a year ago.

Analysts polled by Thomson Financial were expecting a profit of 27 cents per share.

Revenue for the quarter was $2.77 billion, in line with analysts' estimate and up from $2.36 billion a year ago.

Starbucks shares fell 75 cents, or 3.8 percent, to close at $19.22 Wednesday, then fell another 28 cents in extended trading after the results were released. The company's stock is down about 50 percent since late 2006, when it was trading close to $40 a share.

Sharon Zackfia, an analyst with investment firm William Blair & Co., said the lackluster quarter came as no surprise. "I think an investor would have had to be living in a cave not to know that the December quarter was bad for the majority of retailers," she said.

As part of a broad push to revitalize its business, the company said it plans to open about 425 fewer domestic stores and 75 more overseas than previously planned, for a global total of 2,150 new stores. Starbucks has more than 15,700 worldwide.

Schultz said the slowdown in U.S. growth will allow the company to make better use of its time, money and staff and could reduce "cannibalization" — easing pressure some stores experience when a new one opens nearby.

Analysts have been eager for specifics on Schultz's turnaround plan for Starbucks, which has struggled with its own rapid growth, high dairy costs, declining traffic in U.S. stores and competition from cheaper rivals.

But Schultz said the company won't release details, including "five bold innovations," until its annual shareholders meeting in Seattle on March 19.

Starbucks has been testing $1 extra-small cups of drip coffee with free refills in some Seattle stores, which Schultz said it's doing to respond to the economic pressures many of its customers are facing. Some analysts say it could draw in new customers and drive up sales if they decide to upgrade to a $4 mocha or other high-margin espresso-based drinks.

By 2009, Starbucks said it aims to open more stores overseas than domestically for the first time — more than 1,000 stores in its international markets, where Schultz has said he sees enormous potential for growth, and fewer than 1,000 in the U.S.

The company said it expects low double-digit earnings-per-share growth this fiscal year because of the company's efforts to improve operations and "continued macroeconomic weakness."

That could drag earnings below the company's previous target of $1.02 to $1.08 per share. The company earned 87 cents a share last year, and it did not release an updated target for fiscal 2008.

Once again... a Starbucks moment with Jackie Mason

Jackie Mason’s take on Starbucks.....

You want coffee in a coffee shop, that’s 60 cents. But at Starbucks, if it’s Cafe Latte: $3.50. Cafe Creamier: $4.50. Caffe Suisse: $9.50. For each French word, another four dollars. Why does a little cream in coffee make it worth $3.50?

Go into any coffee shop; they’ll give you all the cream you want until you’re blue in the face. Forty million people are walking around in coffee shops with jars of cream: “Here’s all the cream you want!” And it’s still 60 cents. You know why? Because it’s called “coffee.”

You want cinnamon in your coffee? Ask for cinnamon in a coffee shop; they’ll give you all the cinnamon you want. Do they ask you for more money because it’s cinnamon? It’s the same price for cinnamon in your coffee as for coffee without cinnamon - 60 cents, that’s it.

But not in Starbucks. Over there, it’s Cinnamonnier - $9.50. You want a refill in a regular coffee shop, they’ll give you all the refills you want until you drop dead. You can come in when you’re 27 and keep drinking coffee until you’re 98. And they’ll start begging you: “Here, you want more coffee, you want more, you want more?”

Do you know that you can’t get a refill at Starbucks? A refill is a dollar fifty. two refills, $4.50. Three refills, $19.50 So, for four cups of coffee - $35.00. And it’s burnt coffee. It’s burnt coffee at Starbucks, let’s be honest about it. If you get burnt coffee in a coffee shop, you call a cop. You say, “It’s the bottom of the pot. I don’t drink from the bottom of the pot. But when it’s burnt at Starbucks, they say, “Oh, it’s a blend. It’s a special bean from Argentina.....” The bean is in your head.

And there’re no chairs in those Starbucks. Instead, they have these high stools. You ever see these stools? You haven’t been on a chair that high since you were two. Seventy-three year old Jews are climbing and climbing to get to the top of the chair. And when they get to the top, they can’t even drink the coffee because there are 12 people around one little table, and everybody’s saying, “Excuse me, excuse me, excuse me, excuse me.....” Then they can’t get off the chair. Old Jews are begging Gentiles, “Mister, could you get me off this?”

Do you remember what a cafeteria was? In poor neighborhoods all over this country, they went to a cafeteria because there were no waiters and no service. And so poor people could save money on a tip. Cafeterias didn’t have regular tables or chairs either. They gave coffee to you in a cardboard cup. So because of that you paid less for the coffee. You got less, so you paid less.

It’s all the same at Starbucks - no chairs, no service, a cardboard cup for your coffee - except in Starbucks, the less you get, the more it costs. By the time they give you nothing, it’s worth four times much.

Am I exaggerating? Did you ever try to buy a cookie in Starbucks? Buy a cookie in a regular coffee shop. You can tear down a building with that cookie. And the whole cookie is 60 cents. At Starbucks, you’re going to have to hire a detective to find that cookie, and it’s $9.50. And you can’t put butter on it because they want extra. Do you know that if you buy a bagel, you pay extra for cream cheese in Starbucks?

Cream cheese, another 60 Cents. A knife to put it on, 32 cents. If it reaches the bagel, 48 cents. That bagel costs you $312.

And they don’t give you the butter or the cream cheese. They don’t give it to you. They tell you where it is. “Oh, you want butter? It’s over there. Cream cheese? Over here. Sugar? Sugar is here.” Now you become your own waiter. You walk around with a tray. “I’ll take the cookie. Where’s the butter? The butter’s here. Where’s the cream cheese?

The cream cheese is there.” You walked around for an hour and a half selecting items, and then the guy at the cash register has a glass in front of him that says “Tips.”

You’re waiting on tables for an hour, and you owe him money? Then there’s a sign that says please clean it up when you’re finished.

They don’t give you a waiter or a busboy. Now you’ve become the janitor. Now you have to start cleaning up the place. Old Jews are walking around cleaning up Starbucks. “Oh, he’s got dirt too? Wait, I’ll clean this up.” They clean up the place for an hour and a half.

If I said to you, “I have a great idea for a business. I’ll open a whole new type of a coffee shop. A whole new type. Instead of 60 cents for coffee I’ll charge $2.50, $3.50, $4.50, and $5.50. Not only that, I’ll have no tables, no chairs, no water, no busboy, and you’ll clean it up for 20 minutes after you’re finished.” Would you say to me, “That’s the greatest idea for a business I ever heard! We can open a chain of these all over the world!” No, you would put me right into a sanitarium.

Starbucks can only get away with it because they have French titles for everything, bastard sons-of-a-bitches. And I say this with the highest respect, because I don’t like to talk about people.

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