TightWind is written by Kyle Baxter. Stay Hungry. Stay Foolish.

Due to a weak economy and unique costs (shutting down nearly 700 stores worldwide, purchasing new equipment and re-training employees), Starbucks’s profits decreased 97% in the fourth quarter.

It is important to recognize that, although this is obviously a terrible quarter for Starbucks, this is in large part because of the remarkable costs (shutting down stores) they incurred, which Starbucks estimates to be $350 million, and costs associated with investing in new equipment and re-training employees, which I do not have figures for.

This clearly doesn’t cover the entire loss, but it contributes significantly to their fourth quarter results.1 Revenue did, even if by a weak percentage, increase in the fourth quarter, and their same-store sales dropped by 8%, whereas other premium retail chains are seeing double-digit drops in same-store sales.

That is to say, Starbucks is in a weak position, but not as weak as the headline indicates.

1. A $350 million cost is nearly 25% of Starbucks’s third quarter gross profits, to put the cost in context. [↩]