Starbucks Shares Drop on Forecast

Starbucks Corp., the world's largest chain of coffee shops, fell the most in almost five months in New York trading after the company lowered its profit and sales forecasts following a first-ever decline in U.S. customer visits.

The dropped 93 cents, or 3.9 percent, to $23.17 at 4 p.m. in Nasdaq Stock Market composite trading, the most since June. The shares have lost 35 percent this year.

Starbucks raised prices by an average of 9 cents a cup in July, causing U.S. customers who face higher food, fuel and housing expenses to go to McDonald's Corp. and Dunkin' Donuts LLC for cheaper coffee. Wal-Mart Stores Inc. is among the few retailers to benefit from shoppers seeking lower-cost alternatives after reducing its prices ahead of the holidays.

``Investors are going to have to digest the fact that there's no sacred cow left in retail,'' Sharon Zackfia, an analyst at William Blair & Co. in Chicago, who rates the shares ``outperform,'' said yesterday. ``Starbucks has been more insulated, but things that are better insulated get impacted later in the economic cycle.''

Robert W. Baird & Co. analyst David Tarantino lowered his recommendation on Starbucks to ``neutral'' from ``outperform.'' Seven analysts reduced their price estimates on the Seattle-based company's stock.

Source: Bloomberg.com