How can you increse your stock by stores closing ?

Question

http://news.yahoo.com/s/nm/20080730/ts_nm/starbucks_results_dc

like starbuck closing some new stores not fully paid of yet here, dont that money aready paid on setting up that store ,which is now going to be lost ever get on that get on the balance sheet ,these are minimum paying jobs, nothing compare to the cost of setting up a store,so how are company going to make money right away? .and about write offs. how are companys doing it?

Answer 1

Scott's right.

To state it a little more simply: the costs for setting up the stores are either already paid, or are unavoidable over the next few years.

They're closing stores where they think they won't make a profit by operating them.  They expect revenue won't exceed the cost of labor, coffee beans, etc.

Answer 2

I couldn't quite figure out what you were trying to ask, but I decided to take a stab at it.  As you are no doubt aware, the ingredients for a drink at Starbucks cost them pennies.  Then they add labor and the rest is overhead at one level or another.  Everything is marked up immensely.  The idea is that they will sell enough twenty-five cent coffees for $5 that they will be able to cover the labor and all of the overhead.  I would suspect that 99.9% of all starbucks locations are under lease.  If they choose to close a location or abandon it beforehand, they might face some financial losses.  (I say might, because having a starbucks in your new minimall is kind of nice for business and i could see the developers not requiring a lot from them in return for their addition.)  To the extent that they have such losses, they are required to write those losses off, meaning short term loss for a year or whatever.  The rest of the leaseholds would be amortized over the lives of the leases and expensed as rent.  Not much of a balance sheet event except for retained earnings which is minor by no means.