Starbucks Feels The Pinch

Last November Starbucks began talking about cost pressures due to the rising price of milk and also sluggish traffic in their stores. Those headwinds are now affecting the bottom line. From marketwatch.com:

Starbucks issues profit forecast below expectations

Starbucks Corp. warned late Wednesday that fiscal second-quarter and full-year profit will be hurt by decreased traffic at its U.S. stores as well as a "sharp weakening in the U.S. consumer environment."

Its already bruised stock tumbled more than 12% in late trading on heavy volume.

Starbucks, in the middle of rolling out new initiatives aimed at luring more customers into its vast network of stores, pegged fiscal second-quarter earnings at 15 cents a share, below the consensus analyst target of 21 cents, according to FactSet Research.

Seattle-based Starbucks (SBUX) announced that fiscal 2008 profit will be "somewhat lower" than the 87 cents a share it earned in fiscal 2007. Analysts are now forecasting the coffee-shop chain to earn 96 cents a share. The company's fiscal year ends in September.

For the quarter ended March 30, Starbucks said that it had a "mid-single decline" in revenue at U.S. stores open at least one year, a key retailing metric known as comparable-store sales. The downturns in the California and Florida housing markets have hurt company sales, according to Starbucks. Combined, the states account for 32% of its U.S. retail revenue.

"The current economic environment is the weakest in our company's history, marked by lower home values and rising costs for energy," Chief Executive Howard Schultz said in a statement.