Starbucks has had a tough year. This summer Starbucks announced the closing of 600 underperforming stores, including 61 stores in Australia. With fast food restaurants like McDonalds offering premium coffee, the coffee giant’s stock has taken quite a hit. To Starbucks’ benefit, McDonald’s franchisees don’t want to spend the money to implement the full premium beverage program. McDonald’s has estimated it will cost an average of $100,000 per location. Fourth quarter and fiscal 2008 results show that perhaps next year might be better.

Net earnings totaled $315.5 million for fiscal 2008, versus $672.6 million in fiscal 2007, while EPS for the year was $0.43, compared to EPS of $0.87 in fiscal 2007. Consolidated net revenues increased 3 percent to $2.5 billion for the fourth quarter of 2008, compared to $2.4 billion for the fourth quarter of 2007. For the 13-week period ended September 28, 2008, Starbucks reported net income of $5.4 million, which included $105.1 million of restructuring charges and other transformation strategy costs. Net income was $158.5 million for the same period a year ago.

CEO Howard Schultz suggested that the company was already seeing some slight improvement in business. But there’s not much to cheer about yet. In its quarterly earnings report, Schultz says, “Despite a global economic environment which shows no immediate signs of improvement, the steps we took in FY08 position us to deliver EPS growth in FY09… We appear to be more resilient than many other premium brands. And while we cannot call isolated signs of improving sales a trend, we are encouraged by our ability to drive increased traffic at a relatively low cost, as we did on Election Day.”

In summation, keep Starbucks on your watch list. Once the economy stabilizes, those small luxuries like a double-shot frappichino are not too far behind.

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