Page last updated at 06:20 GMT, Thursday, 24 April 2008 07:20 UK

Starbucks hit by housing slowdown

Starbucks cups
Cash-strapped consumers are cutting back on coffee

The demand for expensive coffee has been hit by the US housing slowdown and economic downturn.

Starbucks has cut its forecasts for 2008 profit, blaming an economic environment that it describes as "the worst in the company's history".

The coffee chain giant said conditions had been especially bad in California and Florida, which account for one third of its revenue in the US.

It expects full year earnings to be "somewhat lower" than last year's.

Uncertain times

Results for the first three months of 2008 will be announced on Wednesday 30 April.

Starbucks said it expected earnings per share for the quarter to be about 15 cents (8 pence), down from 19 cents in the same period of 2007 and well below Wall Street forecasts.

More precise forecasts for the year as a whole were not possible, it said, because of the uncertainty about current economic conditions.

"The current economic environment (has been) marked by lower home values and rising costs for energy, food and other products that are directly impacting our customers," said Howard Schultz, Starbucks' chief executive.

Starbucks shares fell 12% in after-hours trading.


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