Starbucks: Drop in traffic, rise in sales

SEATTLE, Nov. 17 (UPI) -- Starbucks says higher gasoline prices and the battered housing market helped cause a 1 percent falloff in traffic to its stores last summer.

"Customers are feeling the impact of the economic slowdown," said Starbucks Chief Executive Jim Donald.

To offset the drop, Starbucks has launched its first national television advertising campaign and will eliminate some beverages and have district managers spend more time in stores, The Seattle Times reported.

Despite the drop in traffic, Starbucks sales in the United States rose 19 percent in the fourth quarter, partly because of a 9-cent price increase on coffee drinks, the Times reported.

Starbucks also faces pressure from McDonalds, which has a $900 million-a-year coffee business and next year plans to introduce lattes, cappuccinos and other coffee beverages, Deutsche Bank analysts recently noted.

"It is very difficult to see how so large a competitor growing so rapidly will not impact same-store sales" at Starbucks, the analysts said in a report.