LOS ANGELES - STARBUCKS cut its plans for new international coffee shops and effectively lowered its 2009 forecast after posting a steeper-than-expected decline in fourth-quarter profit.

Starbucks shares fell nearly 3 per cent after it laid out several scenarios that would result in the company potentially hitting the low end or completely missing its prior forecast for fiscal 2009 adjusted earnings of 90 cents to US$1 (S$1.49) per share.

Executives said none of the scenarios - all of which include a drop in same-store sales - should be taken as a forecast. RBC Capital Markets analyst Larry Miller said in a client note, however, that the company's statements 'effectively' lower 2009 guidance.

Chief Executive Howard Schultz said in late October that the company might have hit bottom in the fourth quarter, but in Monday's statement Starbucks offered investors models for what it would earn 'if the current environment worsens'.

At the same time, Mr Schultz said the company has seen cautious signs of improving same-store sales, a key gauge of retail health.

'It's too early to call a trend, particularly with the important holiday period still in front of us', Mr Schultz said on a conference call where he added that business in October did not deteriorate in terms of comparable store sales or traffic.

The CEO said Starbucks was finished with a restructuring that lowered fixed costs and resulted in many in-store changes that should help the company deliver earnings growth in fiscal 2009, despite a tough economic environment with no immediate signs of improvement.

'We appear to be more resilient than many other premium brands', said Mr Shultz, who did not mention up-and-coming specialty coffee rival McDonald's during the company's conference call with analysts.

The fast-food chain earlier on Monday reported a 5.3 per cent rise in October sales at US stores open at least 13 months.

McDonald's is appealing to cash-strapped consumers with its Dollar Menu and is rolling out lattes and other specialty coffee drinks in the United States at prices that undercut Starbucks'.

Profit drops pm charges
Net profit for the fiscal fourth quarter ended Sept 28 dropped 97 per cent to US$5.4 million, after Starbucks took US$105.1 million in charges related to its restructuring and turnaround efforts.

'Clearly the business is continuing to struggle', said Morningstar analyst John Owens.

'The numbers they reported were not surprising given the very challenging consumer environment and I would say that the guidance as well looks appropriate given the difficult industry conditions out there'.

Investors have been repeatedly jolted by bad news from the Seattle-based coffee chain and digested news last week that Chief Financial Officer Peter Bocian, who as with the company for less than two years, would be leaving the company at month's end to take a job with computer maker Hewlett-Packard. His departure follows those of several other company executives in 2008.

Excluding charges related to restructuring and store closure costs, Starbucks had a per-share profit of 10 cents, missing analysts' average target of 13 cents, according to Reuters Estimates.

Total revenue grew a slower-than-expected 3 per cent to US$2.5 billion from US$2.4 billion, as its US business deteriorated from the prior quarter and contributed to an 8 percent decline in sales at established stores.

Starbucks said its financial position and liquidity remain strong. At the end of fiscal 2008, the company had US$271 million available for short-term borrowings under its combined credit facility and commercial paper programme.

CFO Bocian said the company has capacity for up to US$1 billion in short-term borrowing.

Incoming CFO Troy Alstead told analysts that Starbucks plans to 'substantially' pay down short-term debt and that no share repurchases are being considered.

Starbucks also lowered its forecast for fiscal 2009 net new international stores to 700 from 900 previously.

That business had been a bright spot for Starbucks, but the company is also seeing a slowdown in the United Kingdom and Canada, which produce most of its sales. The stronger US dollar will also weigh on earnings from stores outside the United States.

Starbucks shares fell 2.7 per cent to US$9.92 after closing down 3 per cent at US$10.20 on Nasdaq. -- THOMSON REUTERS