NEW ORLEANS: Starbucks Corp. is trying to refocus in a tough economy as a company with a conscience, announcing a partnership with Bono's (RED) label on Wednesday as it attempts to recover from a slowdown in consumer spending.
The partnership with (RED), co-founded by the U2 frontman, will donate a portion of the proceeds of selected holiday Starbucks drinks to the Global Fund to help raise funds for and awareness of AIDS in Africa, where the coffee company buys some of its beans.
The initiative announced Wednesday at a Starbucks conference in New Orleans, is part of the company's "Shared Planet" initiative, meant to encourage greener, more community-minded practices within the company.
It is the latest attempt at transformation for Starbucks, which had expanded quickly but has now begun to see its sales and traffic decline. The company posted its first quarterly loss this summer and has been closing underperforming stores in the U.S. and Australia.
Howard Schultz, Starbucks' chairman and chief executive, said he does not anticipate any more store closures.
While store traffic was still lower in the fourth quarter, which ended Sept. 30, a slight improvement in the first few weeks of October may suggest, "perhaps, let's underline perhaps, we've bottomed out during the fourth quarter, but we're still negative," Schultz said.
The company is hoping to connect with increasingly thrifty consumers by being "highly relevant" in tough economic times and tapping into the "humanity" of Starbucks and its tradition of social awareness, Schultz said Wednesday.
Schultz believes the Seattle-based company is in a better position than others, having decided months ago to close 600 U.S. stores, open fewer new stores and cut jobs.
In a statement late Wednesday, Starbucks said its same-store sales fell in its fourth quarter, which ended in September, compared to this year's third quarter. But October's same-store sales, or those at stores open at least a year, have "improved slightly" over the fourth quarter, due mainly to a higher average value per transaction, the company said.
"The downturn continued in the fourth quarter, and we did see a slight improvement in the first weeks of Q1," Schultz said, indicating that the trend of declining traffic in Starbucks' stores may have bottomed out.
Starbucks' third quarter same-store sales fell by mid-single digits percentages in the U.S. That followed a similar dip in its second quarter.
The company plans to release fourth-quarter results Nov. 10. Wall Street analysts are largely expecting profit and revenue to drop from the same period a year ago.
Schultz sees the sale of five $20 Starbucks cards for $79.95 at Costco stores — a relatively new arrangement — as a catalyst for getting more people into stores without diluting the brand.
Moving forward amid the economic turmoil, Schultz said, "requires a very disciplined, thoughtful approach."
"And the question is, how can you be highly relevant in this kind of environment? And I think for us, we are going back to our core purpose, our values, what we stand for," as well as maintaining the communal feel of being in a coffeehouse, he said.
Starbucks says it has a multiyear agreement with (RED). From Nov. 27 to Jan. 2, 5 cents from the sale of each Peppermint Mocha Twist, Gingersnap Latte and Espresso Truffle will go to the Global Fund. The company expects to generate millions of dollars. (RED) items will be also be available in thousands of stores after the holiday season.
Bono praised Starbucks for joining an effort that companies like Microsoft, Converse, Apple and Hallmark are already part of, particularly amid the economic turmoil.
"Here we are, talking about the economy tanking. People are saying, Maybe the world doesn't need more coffehouses. And what do you do? What does Starbucks do? You decide to give your money away," he said to thunderous applause from the thousands of store managers and others gathered at New Orleans Arena. "This is not charity. This is commerce."
More than 10,000 Starbucks store managers and others have been pitching in on community projects this week in New Orleans, which is still recovering from 2005's Hurricane Katrina.
AP Business Writer Lauren Shepherd in New York contributed to this report
6 months ago