Howard Schultz, the CEO for life at Starbucks (SBUX) recently told Portfolio magazine all about his plans to turn around the company. The editors should not have bought a word of it.
In the face of a disintegrating US business, the company announced that it would close approximately 600 underperforming company-operated stores in the U.S. market. The PR spin on the news was astonishingly transparent. SBUX called it part of a "multi-faceted plan to transform the company."
The decision will cost the company on the bottom line. Pre-tax charges related to the store closings include approximately $200 million of asset write-offs to be recognized in the third quarter of fiscal 2008. A projected $120 to $140 million for lease termination costs and future lease obligations are currently expected, nearly all of which will be recognized in the fourth quarter of fiscal 2008 and the first half of fiscal 2009.
The stock, already near a 52-week low at $15.60, moved down further after hours. The Schultz show is not playing on Wall St.
Douglas A. McIntyre
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