Starbucks' Profit Tumbles

Lighter store traffic hits the bottom line.
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SAN FRANCISCO - Second-quarter profit plunged 28% at

Starbucks

(SBUX) - Get Report

as fewer customers sought to get their caffeine fix from the chain.

The Seattle-based company had warned last week that its net income would be hurt by a weakening consumer environment. And sure enough, on Wednesday it reported a second-quarter profit of $108.7 million, or 15 cents a share, down from $150.8 million, or 19 cents, a year ago in the same period.

Revenue increased to $2.53 billion from $2.26 billion a year ago. Wall Street analysts had projected earnings of 15 cents a share on revenue of $2.55 billion.

Starbucks estimated that costs associated with its transformation agenda, as well as charges related to store closures, had hurt earnings by 3 cents a share.

"Fiscal 2008 is a transitional year for Starbucks and while our financial results are clearly being impacted by reduced frequency to our U.S. stores, we believe that as we continue to execute on the initiatives generated by our transformation agenda, we will reinvigorate the Starbucks experience for our customers and in doing so, deliver increased value to our shareholders," said Chief Executive Howard Shultz in a statement.

Shultz

took back the reins

as CEO in January as Starbucks continued to lose customers to chains like

McDonald's

(MCD) - Get Report

and Dunkin' Donuts. Since then, he has introduced a plan to reduce the number of stores in the overgrown chain and entice loyal customers to come back.

Starbucks has stopped reporting same-store sales, or sales at store open at least a year, which is a commonly-used measure of how a business is performing. But the company noted that same-store sales were down by a mid-single digit percentage due to slowing traffic.

Starbucks reiterated its full-year guidance from last week, which is expected to be lower than its previous forecast of 87 cents a share. Analysts polled by Thomson Financial project full-year earnings of 85 cents a share.

Starbucks continued during its second quarter to revise its U.S. store openings planned for this year, lowering it to 1,020 net new stores. It also plans to open significantly fewer U.S. stores during 2009-2011, with less than 400 net new stores in each of those years. At the same time, it will continue to expand its international presence.

Shares of Starbucks were down less than 1%, or 11 cents, to $16.12 in after-hours trading.