Starbucks Corp is on track to hit its target of $500 million in cost savings this fiscal year as the world's biggest coffee chain closes stores and sheds staff, its chief executive said at the company's annual shareholder meeting.

We are seeing the beginnings of things starting to gain traction on many of the initiatives we put in place, said Starbucks CEO Howard Schultz at the company's annual shareholder meeting in Seattle.

Starbucks, which has more than 16,000 stores worldwide, is in the process of closing more than 900 and shedding up to 6,000 in-store staff as it trims operations in the global downturn.

Despite the closures, the company's chief financial officer still forecast net growth in U.S. stores this year.

The company is mindful of its U.S. customers hurting during the recession, Schultz said.

We can no longer sit back and ignore the pressure our customers are under, he said. We are being incredibly smart, we're giving everything we can, to be sensitive to the needs of our customers.

Starbucks rolled out a new $3.95 breakfast combo earlier this year in an attempt to combat the view that the company is mostly focused on high-end drinks.

Customers who were visiting stores less often because of the recession were not going to fast-food competitors for coffee, said Schultz.

Some fast-food chains are focusing more on coffee, with McDonald's Corp recently introducing espresso drinks.

The annual meeting, attended by about 1,200 loyal shareholders, was Schultz's second performance since returning as CEO early last year with a mission to revive the company's fortunes.

Starbucks shares have shed more than 70 percent of their value from 2006 highs. The stock was up 27 cents, or 2.4 percent, at $11.41 on the Nasdaq.

(Reporting by Bill Rigby; Editing by Brian Moss)

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