STARBUCKS SLASHES PROFIT OUTLOOK

Starbucks shares fell 12% yesterday when it was announced that the company cut its quarterly and 2008 profit outlook.

From USA Today:

Schultz said in a statement that "the current economic environment is the weakest in our company's history, marked by lower home values, and rising costs for energy, food and other products that are directly impacting our customers."

Fewer customers at U.S. stores triggered a mid-single-digit decline in sales at established stores, called comparable store sales. California and Florida markets, which account for about one-third of its U.S. retail revenue, have been hard hit by the downturn in the U.S. housing market, it added.

As a result, Starbucks reported preliminary second-quarter earnings of 15 cents per share, behind Wall Street analysts' average target of 21 cents per share, according to Reuters Estimates.

Starbucks estimated that costs associated with turnaround efforts and store closures lowered earnings by 3 cents per share in the second quarter, which ended March 30.

Given the continued weakness in the U.S. economy, Starbucks warned that fiscal 2008 earnings per share would be "somewhat lower" than the 87 cents it reported in fiscal 2007, while analysts were looking for a profit of 97 cents per share for the current fiscal year.

"At this time, the company is not providing a more precise expectation due to lack of visibility into near-term economic conditions," Starbucks said in a statement.

STARBUCKS DROPPING GROWTH HORMONE MILK

Responding to criticism from consumer groups concerned about the lack of testing and data regarding rBGH, a growth hormone given to some dairy cows to increase milk production, Starbucks has pulled growth hormone milk products from many of its stores and is expected to go companywide when new milk sources can be found. Earlier this month Starbucks announced it would quit selling food containing trans fats at half of the company's U.S. outlets. Starbucks has a long history of responding to consumer requests and is known as a leader in corporate social responsibility.

From USA Today:

Starbucks Coffee is ending its use of milk products that contain an artificial growth hormone, starting in much of the West and New England. Less than a month after announcing that the chain would stop selling items with trans fats in half its U.S. stores, Starbucks said Tuesday it had begun buying only milk products without bovine growth hormone in those areas. Starbucks has not raised prices and is working with suppliers on the cost of milk, half and half, whipping cream and eggnog, spokeswoman Sanja Gould told the Seattle Post-Intelligencer. Starbucks has 5,668 stores in the United States, but the number affected by the change was not immediately available. It covers company-owned Starbucks outlets in Washington, Oregon, Idaho, Alaska, Montana, Northern California and New England. Earlier this month Starbucks announced plans to stop selling food containing trans fats at half the company's U.S. outlets. The move comes after Starbucks was targeted in a campaign by consumer groups critical of the use of an artificial hormone known as rBGH, which is given as a supplement to dairy cows to increase milk production. For more than a decade, some advocacy groups have asserted that there has not been enough research on the effects in humans of milk products from cows that were given the hormone, which is administered to dairy cattle during the middle phase of lactation to boost milk production. "We are actively engaged with all our dairy suppliers to explore converting our core dairy products to be rBGH-free in our U.S. company-owned stores," Starbucks spokesman Brandon Borrman told Reuters. "It is something we're aiming for."