SEATTLE -- Starbucks Corp. said last week that it doesn't expect sales to rebound during the next year, in a sign that consumers' spending on pricey goods could take a long time to recover.
In its annual report, the Seattle-based coffee company said it expects to report negative sales growth at stores open at least a year in the fiscal year ending in September, according to a report in The Wall Street Journal. Starbucks indicated earlier last month that sales by that measure could be down, though the chain wasn't explicit about it.
The report says Starbucks expects [image-nocss] a difficult environment overseas, an area that the company previously had hoped would make up for its weakness in the United States.
"As the global financial crisis has broadened and intensified, other sectors of the global economy have been adversely impacted and a severe global recession of uncertain length now appears likely," Starbucks said in the report. "As a retailer that is dependent upon consumer discretionary spending, the company expects to face an extremely challenging fiscal 2009 because of these economic conditions."
Starbucks also warned that the economic crisis could hurt the company's liquidity and capital resources.
The company is shutting hundreds of U.S. locations and adding more value-oriented promotions to boost sales and profit at a time when customers are cutting back on extras, such as high-priced espresso drinks.
The filing to the Securities and Exchange Commission also sheds light on how much of a threat new competition is to Starbucks, as McDonald's Corp. and other restaurants add espresso drinks and more elaborate beverages. In the filing, Starbucks says that, in the U.S., "the continued focus by one or more large competitors in the quick-service restaurant sector on selling high-quality specialty coffee beverages at a low cost has attracted Starbucks customers and could, if the numbers become large enough, adversely affect the company's sales and results of operations."
During the most recent fiscal year, which ended Sept. 28, same-store sales at Starbucks' U.S. stores fell 5%, primarily because fewer customers visited the stores. The sales decline accelerated during the year.
The annual report also shows the broad range of factors that Starbucks says have led consumers to cut back on its drinks. The chain cites the higher cost of basic consumer staples, such as gas and food, rising levels of unemployment and personal debt, lower home values and reduced access to consumer credit.
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