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• Dark days for Starbucks: Job cuts and store closures

  Posted Jul 01 2008, 10:31 PM by Anthony Mirhaydari
  Filed under: Retail, Starbucks, Beverages, Anthony Mirhaydari
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  Finally, some good news from Starbucks: the coffee-shop behemoth is closing 600 stores and cutting 12,000 jobs, roughly 7% of its global workforce.

  This is a gutsy move for founder Howard Schultz, who just recently retook the helm with broad pronouncements of returning to roots and reigniting the "emotional attachment with customers" that has been lost over time. After all, Starbucks now has 16,226 locations, up from just 1,886 over the last 10 years. With operations in such faraway lands as Lebanon, Kuwait, Saudi Arabia, Indonesia, Argentina, and Romania, Starbucks' expansionist future once seemed boundless.   Read More...

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• A plan to rescue Starbucks

  Posted Apr 10 2008, 09:44 AM by Anthony Mirhaydari
  Filed under: Retail, Starbucks, McDonald's
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  Pity Howard Shultz. Even after retaking the reins of his global latté-brewing behemoth, vowing to return the company to its roots and launching a six-point plan of attack, his Starbucks shares continue their sickening slide. With this week's launch of the new Pike Place Roast, he's now busily touting efforts to "reinvent brewed coffee across America." Unfortunately, brewed coffee isn’t exciting, and with a much lower-selling price than Starbucks' espresso-based drinks, its promotion will surely erode margins.

  The other growth initiatives are similarly lackluster: New coffee machines, a customer rewards program, a stronger focus on environmental initiatives, and a dedicated web portal to accept new ideas from anyone who cares. The last smacks of desperation. So, being a native Seattleite, I feel obligated to offer a simple, four-point rescue plan:

  1. Stop focusing exclusively on coffee: Yes, Starbucks needs to do everything it can to improve its image as a purveyor of premium coffee. The move towards pre-ground beans and automatic espresso makers left it vulnerable. This is especially true now that McDonald’s and others are offering vastly improved and in some cases superior coffee, mitigating the company’s claims to quality.   Read More...

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• Insiders bail as McDonald's brews trouble

  Posted Mar 21 2008, 11:20 AM by Anthony Mirhaydari
  Filed under: Retail, Starbucks, McDonald's
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  Conventional wisdom says McDonald’s should continue to have great success as the economy slows and consumers trade down restaurants just as they’ve been trading down to Wal-Mart for their shopping needs. Sounds great, except that the company's insiders beg to differ: Over the last six months, nearly 760,000 shares worth some $43 million have been sold.

  A significant amount by any measure, this works out to roughly a 20% liquidation of the insiders according to Thomson Financial. CEO James Skinner sold 35% of his stake. Gloria Santona, the general counsel, parted with more than half of her shares. Jose Armario, responsible for Canada and Latin America, traded away 80% of his holdings.

  My guess is that they’re less than confident about the big McCafé push. Better drip coffee is one thing, and McDonald’s definitely has good drip coffee. But going head-to-head with Starbucks is another. Don’t kid yourself: McDonald’s will never be Starbucks -- and by the look of things it probably doesn’t want to be Starbucks anyway. There just isn’t any synergy between burgers, fries, and cappuccinos.   Read More...

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• Starbucks needs a jolt

  Posted Oct 03 2007, 11:46 AM by Robert Walberg
  Filed under: Retail, Starbucks
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  Why is one of the great growth stocks of the last decade languishing near its 52-week lows when the market is racing to new highs?  I know the cost of coffee is on the rise and that energy costs are pinching margins as well, but this is Starbucks -- a company that somehow made people feel good about paying more than $2 for a cup of joe.

  Is it possible that management has lost its way?  Pay increases combined with the rapid pace of new store openings might not be the most prudent moves at a time when commodity expenses are high and the economy is slowing down.  In fact, concerns over rising costs prompted one analyst to issue a sell rating last week -- a move that promped plenty of debate on the Starbucks gossip blog.   

  Of course, issuing a sell rating when the stock is already down 25% this year isn't exactly the stuff of legends. It would have been nice to see that rating months ago when it might have made a difference to investors long the stock. Coming now when the bad news is already out, comps are soft and commodity prices are at their highs might be the signal small investors need to get back into the stock   Read More...

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