Starbucks also plans to shift some of the money it was going to spend to open new stores in the U.S. to open stores in the international markets.

Starbucks has been struggling in the U.S., as consumers hit by several macro-economic pressures, such as high fuel prices, have reduced spending on small luxuries like expensive coffee.

A cup of Starbucks latte in the U.S. costs more than a gallon of gasoline at pump stations.

Disposable consumer spending is expected to decline as consumers face rising cost of fuel and heating bills, and falling values of homes. December month unemployment rate jumped to 5% after economy created only 1.3 million net new jobs in 2007 sharply lower than 2.3 million in 2006.

Schultz in a letter to partners highlighted that, “Improving the current state of the U.S. business: by giving our store partners better training and tools, launching new products – some of which will have an impact as significant as Frappuccino® products and the Starbucks Card – and introducing new concepts in store design, among other enhancements to the Starbucks Experience. At the same time, we will slow the pace of our U.S. store openings and close a number of underperforming locations, so we can renew our attention on store-level unit economics and be laser-focused on flawless execution.”

Competition also has stiffened for coffee dollars. Dunkin'' Donuts and McDonald''s are ready introducing their own lines of gourmet coffee at cheaper prices than at Starbucks.

Schultz will come face to face with increased competition, and the need to attract new customers and regain old ones.

Schultz will also have to deal with rising prices of coffee, milk and a consumer backlash on rising coffee prices at Starbucks. Starbucks has also suffered from too many stores in less than desirable locations. Starbucks has also come under fire for the lack of cleanliness and rising employee turnover at stores.

A cup of coffee at Starbucks cost at least $1.75 but coffee farmer gets less than 15 cents. When a customer buys a cup of latte, which generally cost $3 a cup, he is also paying for milk that costs nearly $28 a gallon.

Starbucks operates over 15,000 stores worldwide, and has a target to raise that to 40,000 globally.


1:00PM New York, 6:00PM London - U.K home prices rose in December by an annualized 5.2% rate.

London stock averages gained for the first time in three days led by commodity stocks as metal prices increased.

In London trading FTSE 100 rose 0.33% or 20.80 to 6,356.50.

Of the 102 FTSE Stocks 56 gained, 4 declined, and 5 were unchanged. Smith & Nephew led advancers with a rise of 7.9% followed by BT Group climbing 5.21%.

HBOS’s Halifax House Price Index showed today on the mortgage lender’s Web site that house prices rose after three successive monthly declines by 1.3% in December. The prices were 5.2% higher than a year ago.

Furthermore, fourth quarter prices for 2007 were 0.8% lower compared to those realized in the third quarter.

The average price of a home in the U.K. increased by 11,759 pounds from a year ago to 97,039 pounds.

According to HBOS, the mixed pattern of monthly price rise and falls characterizes a subdued market. Prices are also expected to be flat in 2008.

The British Retail Commission announced today on its Web site that U.K. retail sales rose 0.3% in December 2007 on a same store basis compared to a year ago when sales climbed 2.5%. In addition, the three month trend rate of growth declined 0.8% from 1.8% in November for like-for-like sales, and fell 2.8% from 3.8% for total sales.