Starbucks Hopes Growth Abroad Will Save Its Bottom Line

LONDON, July 31, 2008 -- On the same day that Starbucks posted its first quarterly loss since it went public 16 years ago, its shops in Britain began offering free refills of regular coffee.

It's just one way the company is trying to hold onto European customers while fewer Americans are choosing to shell out more than $3 for gourmet coffee concoctions.

Starbuck's third-quarter earnings, which were reported Wednesday, weren't good news for the Seattle-based coffee company. It reported a net loss from April to June of $6.7 million, compared with a gain of $158 million for the same period a year ago.

Management blamed continued slow traffic and declining sales on a weak economy and poor real estate decisions. Starbucks has also been hurt by competition from chains like McDonalds and Dunkin' Donuts, which are breaking into the coffee connoisseur business.

In an attempt to cut costs and return to profit, the company is closing stores, shaking up its management team and launching a new line of nutritious smoothies.

And although Starbucks plans on closing more than 600 stores in the U.S. and more than 75 percent of its locations in Australia, business is brewing in other parts of the world.

There are plans under way to open more than 900 new shops in Europe and Asia this year.

Even though the company has been criticized for building too many stores too quickly in the United States, it still hopes that expanding abroad, where there's room to grow, may revive its sluggish performance.

In Europe there are more than 1,400 Starbucks stores – that's two-and-a-half times as many as there were just five years ago.

In one section of western London there are four Starbucks stores in a three-block radius. The newest location just opened two weeks ago.

Even the most devout java junkies are scratching their heads at the plethora of beaneries.

Lucy Benson, who sits outside her local Starbucks with her drink of choice – a grande soy mocha – said she's noticed the trend.