Profits at Starbucks collapsed 97 per cent in the fourth quarter of the year after the ubiquitous coffee chain was forced to absorb the effect of weakening demand and the cost of closing stores earlier this year.

As the group admitted to the earnings plunge, shares in the Seattle-based group sank 3 per cent in after hours trading to $9.91 each. Two years ago, the stock fetched $38.41.

The group, which this year admitted that it had too many stores in some areas and ousted its chief executive, said that profit for the last three months of the year fell to $5.4 million, compared with $158.5 million for the same period the year before.

While total revenue rose 3 per cent to $2.52 billion, just below Wall Street expectations, like for like sales for the period slid 8 per cent in the US as Americans cut back on discretionary spending.

Chief Executive, Howard Schultz, said the steps the company took in 2008 should help the company deliver earnings per share growth in fiscal 2009, despite a tough economic environment.

“We appear to be more resilient than many other premium brands,” said Mr Shultz.

It has been a tough year for the company. Last week, Peter Bocian, its Chief Financial Officer, who as with the company for less than two years, said he would be leaving at the end of the month to take a job with computer maker Hewlett-Packard.

Morningstar analyst John Owens said: “Clearly the business is continuing to struggle. The numbers they reported were not surprising given the very challenging consumer environment and I would say that the guidance as well looks appropriate given the difficult industry conditions out there.”

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