When a Starbucks opened down the street from his Adams Morgan coffeehouse in 2004, Constantine Stavropoulos was a little worried. He had heard stories about the coffee giant's ability to snap up customers and drive competitors out of business. Months later, his worries subsided. Customers were still lining up for Tryst's lattes and espressos despite Starbucks' presence. By the end of the year, Tryst's sales had increased 10 percent.
"We were providing what Starbucks thought they were delivering: a community hub for people to meet and drink coffee together," Mr. Stavropoulos said.
The store he once feared could now be at risk for closure. Earlier this month, Starbucks announced it will close 600 company-operated stores over the next year. Starbucks hasn't disclosed which stores will be shuttered.
Starbucks reported that its U.S. operating profit fell more than 27 percent from the first quarter of last year. The company's stock price has slumped 40 percent over the past 12 months. Starbucks executives say a sagging economy and the credit crunch have cut into profits and slowed foot traffic in stores. However, Starbucks also has been a victim of its own success.
The number of Starbucks stores that have popped up like mushrooms across the American landscape has long served as a punch line for late-night comedians - and that rapid growth is hurting business. Company executives said 25 percent to 30 percent of a Starbucks store's revenue is cannibalized when a new store opens nearby. Starbucks had 7,087 U.S. stores as of February.
"There is no question that they've opened too many stores," said John Owens, an equity analyst at the research firm Morningstar. "But the brand is also facing some issues."
When the Seattle compa ...