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Why Wall Street hates Starbucks

Posted Mar 30 2008, 08:26 PM by Douglas McIntyre
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Starbucks has been a disappointment recently. Same-store sales in the U.S. slowed over the last couple of quarters. The company pushed down its guidance. Founder Howard Schultz kicked out his CEO and took over.

In late 2006, Starbucks traded over $40. It is well below that now -- under $18 on most days.

Right as the stock peaked, then-CEO Jim Donald made the audacious statement that the company would eventually have 40,000 stores. On the day he said that Starbucks had 12,440 stores. Looking back, it is almost certain the his prediction had no chance of becoming a reality. But, the $40 share price had gone to his head. He had become delirious with success.

Schultz and company has to live with echos of that forecast, and they will have to for some time. (For more about Starbucks' troubles, read this and this and this.)

It is not unlike a statement made by AMD in the middle of 2006. It would end up with 40% of the market for server chips by mid-2009. AMD was trading at $36 or so when the company made that prediction. Since then larger rival Intel has beaten it like a red-headed mule. AMD is now a $6 stock and that is not likely to get better. It has about 20% of the server market.

Outsiders say that Wall Street doesn't have a long memory. That may be true in some cases, but it does tend to remember the big promises from big companies. Better to keep your mouth shut and let the numbers speak for themselves.

Comments

 

A good alternative to Starbucks is It's a Grind Coffee.Great service Great coffee

I think that Starbucks has lost the People formula, they always were able to attract an element of intelligent workers within the College and retired community. However the work hours and promotions are being allocated to under educated & less personable people. Upper management needs to look at the movement within stores that had decent revenue and go after the Nest Featherers that have been down grading the Starbucks philosphy and reputation.(District mgrs and store managers) May want to start in Southwest O.C., CA  Good hunting! hint-big E & T.J.)

LH

Economy is one thing but generation change is another... I had plenty of my starbucks coffee but even today being in Europe I still like it... I'm glad that Mr. owner decided to take steer in his hands, maybe now I still can get my "Irish Cream Late in any store?"

starbucks and coffee is like oil and water, or a republican in the white house named bush and someone looking out for the middle class American. but Lou Dobbs drinks dunkin donuts coffee, the best!

Every time I have been to one of places as soon as  walk in its lke the twilight zone,of smiless people with their nose and pinky sticking up in the air, looking to see if you notice them. Over priced bitter coffee.

I hope Starbucks continues to suffer.  I was born and still reside in the greater Seattle area.  Howard Schultz sold the Sonics, so this is karma paying him back for pulling one over on Seattle sports fans.  I continue to boycott Starbucks.

Why all the harping on Starbucks?  Just because they were so successful and still seem to be doing good?  Typical of people, hate them because they are succeeding.  I love Starbucks but you what I also love Dunkin Donuts coffee, and the plain old Folgers I buy from the store. No one is forcing anyone to go to Starbucks, and just because I want to go there once in a while doesn't mean I think I'm better than anyone else.  If the problem is you can't afford it, then don't concern everyone with your financial problems!

They sell a reakky good product, but with  so many option I feel lost.  If you are coming dowm to Miami you will find a lot of  "cafeteterias"  that really know  how to make a very good one expresso; and  for a good price.  But don't ask for expresso; you will need  to use the local  slang  "cortadito" or colada.

I am really amazed at the anger some people have against Starbucks customers.Look, if you want to go to McDonalds and sip coffee (which I do also),while the kids are screaming in the Playplace as their single parent moms stare vacantly into space, be my guest.

I agree that Dunkins at least gives a great selection of donuts. Starbucks baked goods need improvement. You call that a "scone"? Maybe a trip to Scotland to check out a real scone, or Germany for pastry class.

But the reality is that I don't buy a "four dollar cup of coffee" at Starbucks. That is a specialty drink, and probably a lot more wholesome than an alcoholic cocktail.

I buy a tall or grande coffee of the day, for $1.55 to $1.70 .For that I get an hour or so in a nice place where I can read and get some work done. The bathrooms are actually clean,the tables not formica, and the lighting is not that bright,migraine triggering fluorescent.

I agree that especially in large Eastern cities,they could improve on employee friendliness. Also, just because you got hired with EEOC or affirmative action does not mean that you can wear dreadlocks or cornrows and sneer at the customers.

All in all, Starbucks is here to stay. Get rid of the CD racks and the predominance of Spanish and African music.No more sponsoring politically correct movies or books. Not all of us customers are politically correct yuppies. Some of us are even those dreadful "conservatives." But we spend money too.

Just good coffee and a good place to read the paper or meet someone for a chat.

You want a good cup of joe, buy Mayorga beans and grind them up yourself.  It's not as "burned" as Starbucks and you can grind to suit yourself.  We like the stronger cuban roast.  I thought it was some foreign brand and it turns out the roaster is in Maryland.  I buy 2lbs for 12.99 at Costco and it's 7.99 a lb at Bloom, former Food Lion so it's a little pricier than average. But it's so good.   Giant doesn't carry it and I won't walk into a Safeway.  Dunkin Donuts blows.

Hey if Folgers wants to spin off, hire me as CEO, I'll make you a fairly good canned coffee at a good price.  It's in the roasting and you guys don't know what you're doing.  I won't touch canned coffee myself but I'll sell it for you.

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