Starbucks Burned Again

Updated from 5:33 p.m. EST

Starbucks (SBUX Quote) got too full of itself.

The java giant put together an epic streak over the last 20 years that is the envy of corporate America, but in the end, reality became unavoidable in 2007 -- a year in which its stock price has so far fallen 32%.

It was a tough fiscal year for Starbucks, and it was capped off on Thursday with news of its first quarterly decline in U.S. store traffic in at least three years. It also offered a disappointing earnings forecast for the current quarter, promising a rebound in the back half of 2008.

Translation: Things are getting worse, and if they're not going to get better, we'll tell you about it later.

For the first quarter of 2008, Starbucks anticipates earnings of 28 cents a share. That's about 3 cents below Wall Street's estimate, according to Thomson First Call.

Donald said the high cost of dairy products is the culprit for the disappointment, but while Starbucks operating margins will decline in the quarter, Donald expects them to improve in the second half of fiscal 2008, and end the year with a net gain.

But Starbucks' outlook for the full-year was disappointing as well. The company now expects earnings for 2008 in a range from $1.02 to $1.05 a share, allowing for downside to analysts' target of $1.05.