Last night SBUX announced that it was going to close approximately 600 stores in the U.S. This represents a significant increase from the 100 store target the company previously announced. These stores account for about 8% of the U.S. Company operated store base. Approximately 70% of the stores targeted to be closed were opened since the beginning of fiscal 2006 and they represent about 19% of the stores opened from 2006 to 2008. The vast majority will close in Q4 of fiscal '08 through the first half of fiscal '09. In addition, SBUX reduced the number of planned new U.S. company operated stores to fewer than 200 for 2009 (down from about 250).
I have said before that SBUX's shareholders are paying dearly for the ill-conceived capital allocation decisions over the past three years. In the coming quarters, SBUX shareholders will be richly rewarded as the company corrects the excesses of the past and makes smarter capital allocation decisions for the future.
I love the shrink to grow stories, as the benefits to the P&L are immediate. First, by closing 600 stores that are losing money, EBITDA will improve. Second, 10% of the store base should see improved sales and profits due to the excess capacity taken out of the system.
This is a significant inflection point for the company.
I have said before that SBUX's shareholders are paying dearly for the ill-conceived capital allocation decisions over the past three years. In the coming quarters, SBUX shareholders will be richly rewarded as the company corrects the excesses of the past and makes smarter capital allocation decisions for the future.
I love the shrink to grow stories, as the benefits to the P&L are immediate. First, by closing 600 stores that are losing money, EBITDA will improve. Second, 10% of the store base should see improved sales and profits due to the excess capacity taken out of the system.
This is a significant inflection point for the company.
