Dear Partners, 

It has been almost six months since I returned as ceo.  During this time, together, we have begun to transform the company by relentlessly focusing on our customers and the experiences they have in our stores.  Espresso Excellence training, the successful launch and response to Pike Place Roast, Mystarbucksidea.com, the introduction of the state-of-the-art Mastrena espresso machine, the acquisition of Clover, our partnership with Conservation International, and the roll-out of the Starbucks rewards program are all examples of our commitment to our customer and elevating the Starbucks Experience. 

This summer, beginning July 15, we will unveil healthy, good-for-you beverages, which are part of the Health and Wellness offerings at Starbucks.  In addition, in Southern California, we will introduce a refreshing, indulgent cold iced beverage.  Steeped in Italian heritage, it will be an exclusive product that our customers can only find at Starbucks.  I can't tell you just how excited I am about our new innovations and programs and I believe you will be also. 

For more than a year now, we have seen the adverse impact that a slower economy and dramatic decline in consumer confidence have had on our U.S. business.  This has resulted in a drop in comparable store sales due to a reduction in customer traffic.  The pressure on store unit economics has required us to take a serious look at our store portfolio.  As a result, we must be more disciplined than ever in examining and evaluating our business. 

After an extensive and rigorous review of our U.S. company-operated store portfolio, our executive and field leadership team, which included Operations, Store Development and Finance, has decided to close approximately 600 underperforming company-operated stores in the U.S. market, which includes our previously announced plans to close 100 stores. 

Unfortunately, this hard, yet necessary decision will result in the elimination of many full-time and part-time retail positions. The majority of the store closures are anticipated to occur during the balance of FY08 and the first half of FY09. The exact timing of each store closure is dependent on third-party agreements and are, therefore, subject to change.  As always, we will treat our partners with respect and dignity, and in the spirit of transparency, we commit that all partners in our 7,200 plus company-operated stores will be informed as to their store's status (remaining open or closing) by mid-July.  We expect to place many of our affected partners in available positions at nearby Starbucks stores.  Those partners, who are not offered a comparable position within a reasonable distance from their current store location, will be offered a severance payment to aid their transition.  These payments will be available to all full-time and part-time partners, and will be based on job level and current pay rate.  Additionally, there is an ongoing review of our non-store organization, including both field and Starbucks Support Center resources.  Changes related to this review will be communicated to partners and implemented no later than August 1. 

Throughout the history of our company, we have always aspired to put our people first. This makes our decision to close stores more difficult, as it disrupts the lives of our partners, who have worked so hard to deliver superior service to our customers. At the same time, we recognize that we must make decisions that will strengthen the U.S. store portfolio and enable us to enter fiscal 2009 focused on enhancing operating efficiency, improving customer satisfaction and ensuring long-term shareholder value for our partners and customers. 

By far, this is the most angst-ridden decision we have made in my more than 25 years with Starbucks, but we realize that part of transforming a company is our ability to look forward, while pursuing innovation and reflecting, in many cases, with 20/20 hindsight, on the decisions that we made in the past, both good and bad. However, I strongly believe that our best days are ahead of us. 

We believe that building an enduring great company requires the thoughtfulness and, at times, the courage to make some very tough, difficult decisions.  This is one of those times.  We have built one of the most recognized and respected brands in the world -- the essence of which has grown out of the passion and character and integrity that is inherent in our partners. And I promise you that I understand the magnitude of closing so many stores and the emotional impact it will have on our partners.  I assure you that we have taken all of this into consideration in doing what is necessary to strengthen our company for today and the future. 

As always, thank you for all you have done and continue to do for our company.

Onward, 

Howard