Bitter 2008 brewing for Starbucks

Starbucks' profits could be hurt by a slowdown in consumer spending

Starbucks, the world's largest coffee chain, has warned of a tough 2008, saying it expects hard-up US consumers to buy fewer lattes and espressos.

The coffee chain reported a 35% jump in quarterly profits but lowered sales and earnings forecasts for next year after a drop in US customer visits.

Rising dairy costs would also dent the company's bottom line, Starbucks said.

For the three months to the end of September, Starbucks posted net earnings of $158.5m (£77.6m).

The news knocked the company's shares lower in after hours trading on fears that US consumers, concerned about higher food and energy costs, would opt to go to cheaper places for their morning cup of coffee.

It said it would open 2,500 stores in its 2008 financial year, beginning in October, 100 fewer than its original target.

Same-store sales, a key measure of a retailer's health, increased 4% in the quarter.

Business in overseas stores was healthier, with traffic rising 5% and average transaction value increasing 1%.