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Starbucks: No Turnaround Yet

Posted Nov 10, 2008 05:25pm EST by Joseph Weisenthal in Products and Trends, Recession

From ClusterStock, Nov. 10, 2008:

Starbucks caught some buy action a couple weeks after its 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."

For optimists, that's not much to hang on. Otherwise, the numbers were basically on the low-end of expectations: Revenue was $2.5 billion in the quarter vs. $2.58 billion consensus, and adjusted EPS of $.10 was shy of the street's $.13. Although revenue was up slightly from last year, the real story was in same-store sales, which were down 8%.

Meanwhile, for 2009, the company says it's hoping for a net decrease to its US footprint of 20 stores, continuing a plan to scale back and shore up its locations.

See Also:
Starbucks Offers Free Coffee To Voters And Non-Voters
Does Starbucks Already See A Rebound?

22 Comments

georgeg
georgeg - Monday November 10, 2008 06:01PM EST

Where is N. RABINI on Starbucks... how come you guys have not had him on in a while. Everything he said came true.

madmilker
madmilker - Monday November 10, 2008 06:21PM EST

jus how in the he!! are you gonna turn around a company tat sells a $4.00 cup of coffee with a consumer only having $0.50 in their pocket?

__A_YAHOO_USER__
__A_YAHOO_USER__ - Monday November 10, 2008 06:33PM EST

too expensive in time of recession,why not reduce the price to two dollars;.....Charity begin at home......

__A_YAHOO_USER__
__A_YAHOO_USER__ - Monday November 10, 2008 06:33PM EST

too expensive in time of recession,why not reduce the price to two dollars;.....Charity begin at home......

__A_YAHOO_USER__
__A_YAHOO_USER__ - Monday November 10, 2008 06:33PM EST

too expensive in time of recession,why not reduce the price to two dollars;.....Charity begin at home......

Yahoo! Finance User
Yahoo! Finance User - Monday November 10, 2008 07:14PM EST

if people can afford iPhones they can afford a $3 latte. people don't ever skimp on instant gratification. and we need are caffeine!

Yahoo! Finance User
Yahoo! Finance User - Monday November 10, 2008 09:07PM EST

I am unemployed and come to starbucks more often. It is a great place to relax and forget things. MDC cannot be the same.

robert
robert - Monday November 10, 2008 09:45PM EST

oi im going to micky dees!!!!a kings ransom for a cup of coifee!!oi ve!!!

ken
ken - Monday November 10, 2008 09:55PM EST

When Starbucks become less of a hangout and more like a short coffee stop meeting place, they'll probably suffer with lower traffic than required. Get some little old ladies working in there that are interested in doing a good job.Give folks their coffee at a reasonable price and get the traffic mooooooving. If there are still a few folks that think thery're too good to sit in the same coffee shop with the average, (plumber) Joe, Starbucks could change some of their stoes and call them, Starbucks Plus. Let the mucky mucks pay double for the same thing.

GeraldF
GeraldF - Monday November 10, 2008 10:05PM EST

Starbucks is like "Snapple" several years ago...a fad gone awry. The "Starbucks" mystique has played out. Too many other alternatives to get a caffeine fix. Look for the stock to stabilize in the 6-7 dollar range for a while. GL, all. Good coffee ?? Absolutely. Is the stock worth 10 bucks ? No way....

rkim777
rkim777 - Monday November 10, 2008 11:55PM EST

Starbucks coffee is okay but nothing special. However, caffeine in general makes me have to take a crap so maybe this is why I don't distinguish one brand of coffee from another.

Yahoo! Finance User
Yahoo! Finance User - Tuesday November 11, 2008 01:39AM EST

The most competitive price for starbuck coffee is $ 1.50 to make them full all the time.......

Yahoo! Finance User
Yahoo! Finance User - Tuesday November 11, 2008 09:07AM EST

Starbucks is a good concept but more of a impulse buy these days probably than planning to go pay $4 for a cup-o-joe. Acknowledging that there is very high profits on this stuff, they should look at recession based pricing reductions (to keep what traffic there is up) and or extend discounts for customers. The buy one in the morning and get one for $2 in the afternoon was a interesting promotion that I take advantage of a few times when I wouldn't have gone back that same day otherwise. Their GoldCard promotion is a bust though - $25 bucks to get a 10% discount when you can go to Costco, probably others and get a SB card that represents a 20%+ discount. Starbucks should also go free WI-FI with purchase, regardless of payment type. I often go to Panera's instead of Starbucks for that reason (free WIFI).

Yahoo! Finance User
Yahoo! Finance User - Tuesday November 11, 2008 10:23AM EST

starbucks is too big to fail...where is a government bailout?

asdf
asdf - Tuesday November 11, 2008 11:09AM EST

The novelty has worn off. The store across the street once had a perpetual line of customers and three cash registers going. Now you can walk by and see no customers at all.

Yahoo! Finance User
Yahoo! Finance User - Tuesday November 11, 2008 11:21AM EST

I never liked SBUX since the first and only time I walked in. Has always been over priced and a poor value. It will be trading below a dollar a share (if that much) by the end of 2009. Thanks SBUX for the opportunity to make $ on short sales though!!!

BruceF
BruceF - Tuesday November 11, 2008 12:32PM EST

hoping for the value drop with SBUX so I can make money to buy coffee

Steve
Steve - Tuesday November 11, 2008 04:48PM EST

Starbuck's bashing has become quite popular with non Starbuck's customers of late. They claim a cup of coffee costs 4, 5 or even 6 dollars. There are people whom have never been to a Starbuck's that actually believe a cup of coffee costs 5 or 6 dollars at Starbuck's. Truth be told, a cup of coffee at Starbuck's is only 30 or 40 cents more than anywhere else. If you want to do apples and oranges, check the price of a milk shake at any fast food restaurant and compare it to a Frappuccino. What about those of us that spend 4 dollars on a scoop of ice cream or 8 dollars on a bag of popcorn. Sure I can get a cup of coffee for less but do I want to hang out in the alley behind 7-11. Starbuck's is and represents a cultural change. For many it is just about the only social thing they do. Starbuck's is where people go on dates. For many, it is a good alternative to getting hammered at a bar. People meet friends, do business, hang out or just unwind. A movie can be far more expensive and how social is that? Maybe Starbuck's is a great value. Maybe it can save you money. It all depends on you. Did Starbuck's make mistakes? Yes, in my opinion. They ran out of places to expand and the department in charge of expanding took some very bad lease arrangements when there was no place else to go. Another mistake was playing music that people would actually listen too. This cut down the social nature of Starbuck's. People are not very social when they are listening to music. The less interesting background music served atmosphere much better. Obviously, someone has recognized these problems and is correcting them. "Sorry" to you bashers, but Starbuck's will trim and it will grow again. Every new college class yields scores of customers loyal to Starbuck's

Peter A
Peter A - Tuesday November 11, 2008 09:25PM EST

I agree completely with vallegolf....check out the price of the lousy coffee at dunkin donuts, bk, mckdonalds, or your local coffee shop....it's about the same price. Starbucks deliver a great cup of coffee while you can drink yesterday's coffee at these other places for a dime less. Smart!

Cecilia
Cecilia - Tuesday November 11, 2008 11:55PM EST

Loyalty? New customers? Value? Innovation? Stability? The only complany I see that combines it all: APPLE (Full Disclosure- I am long AAPL and prefer coffee brewed at my office or on the street corner)

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