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Starbucks closing 600 coffee shops

Starbucks will close 600 US coffee shops and eliminate as many as 12,000 jobs, the most in its history, as chief executive Howard Schultz slows the chain's expansion after it doubled in size in four years.

Starbucks gained as much as 7.2% in late Nasdaq trading after saying the reductions amount to 7% of its workforce worldwide. The cuts include full- and part-time employees and will come over the next nine months, the Seattle-based company said.

It was not immediately clear if the lay-offs and closures would affect Australia, where Starbucks has 85 coffee shops after opening its first outlet in Sydney in 2000.

Seventy percent of the stores to be shut are less than three years old, the company said. To put it another way, Starbucks is closing 19% of all US company-operated stores that opened in the last two years, chief financial officer Pete Bocian said during a conference call.

Schultz, the 54-year-old former CEO who regained the post in January, is coming to grips with Starbucks' declining earnings and the ''overgrowth'' of the past four years , said Matthew DiFrisco, an analyst at Oppenheimer & Co.

''It shows Schultz is willing to do the tough things that are necessary,'' said James Walsh, an analyst at Coldstream Capital Management.

Starbucks' sales and earnings have declined as cash-strapped consumers facing record petrol prices pull back on gourmet coffee and other luxuries.

Most of the closings, which include 100 announced previously, will be completed by next March, Starbucks said. The shops are located in ''all major US markets,'' the company said without elaborating. Florida and California are among the largest states affected, spokeswoman Valerie O'Neil said in an interview.

Some analysts had wondered whether Starbucks' explosive growth in the US would come back to haunt it as the market became saturated.

But before Tuesday, the company had avoided acknowledging that saturation was an issue, and pinned weak financial results and adjustments to new store openings on the economy.

Starbucks still plans to open new stores in 2009, but has now cut that number in half to fewer than 200. The company did not adjust its plan to open fewer than 400 stores in 2010 and 2011.

At the end of March, there were 16,226 Starbucks stores around the world. The company operates 7257 of those stores in the US and 1867 abroad; the remaining 7102 locations are run by partners who licence the Starbucks brand.

AP, Bloomberg