Check out the reallocation of consumer spending.
 
Pricey coffee? Out. Spending at the dollar store? In.
 
Family Dollar posted a better-than-expected quarterly profit, helped by tight control of inventory and expenses, and said June sales were better than expected as consumers received their tax rebate checks.
 
While traffic was down, customers were spending more on each trip.
 
Meanwhile, as the economy softens, so has Starbucks’ business.
 
The coffee shop operator now says it will close 600 U.S. stores, six times the number it had targeted in January.
 
Gone are the days when a Starbucks on every corner worked for the company. Most of the stores to be closed are near other locations, so pruning the underperforming locations might help the others grow.
 
” ‘Reverse cannibalization’ should be felt in the relatively near future as the bulk of stores are located within close proximity of another unit and will be closed by the first half of 2009,” J.P. Morgan analyst John Ivankoe said.
 
Also in the basket:
 
EXCLUSIVE-Kraft reps all over stores to boost sales
 
ANALYSIS-UK grocers to shun price war as shoppers trade down
 
Stores look to lure millennial generation (WWD)

(Photo: Reuters)