so why is the stock down 40% this year? And Howard is coming back to stymie McDonalds move into coffee bars??
The stock is down for several reasons. The main three as I can make them out are the failure of the plan for rapid expansion in China, companies like MacDonald's creating more competition, and (like you said) same store sales being down because of new openings.
The fact that stores return to positive "comps" (same week sales results to the previous fiscal year) within a year or two doesn't change the fact that negative comps still negatively affect the stock. Couple that with the fact that it can take as long as ten years for the company to gain a complete return on the investment they make for a new store, and you have a serious strain on the stock.
China was just a failed expansion, as far as I know. It was supposed to be the company's biggest opportunity. Har har...
And, the most serious (long-term) hit to the stock is that they have lost their unique identity in the market. Starbucks serves hot breakfast sandwiches now all over North America. MacDonald's serves espresso drinks. For cheaper, as far as I know. The fact is that until recently, there was still a mindset about Starbucks that made people think they were paying more for something they couldn't get anywhere else. Depending on the customer, the drink, the store, and the barista, that can still be true. But as long as Starbucks continues on its apparently perpetual quest to saturate the market, and now that other chains are competing in the same product area, that mindset is changing. Long time, regular customers are are now faced with a decision - they need to re-evaluate whether or not they are paying high prices for a privilege and better product, or of they are over-paying for a product they can get down the street for less. And Starbucks is losing out on that decision.
They are in a tough spot becasue of that, and as far as I am concerned, they need to really rethink their long term strategy if they plan to succeed. Retention in the stores is DOWN. People are leaving left, right, and centre because they can find better jobs. Starbucks professed for years to be an excellent employer with fabulous benefits, blah blah. But, having worked for them for three years (no more, I managed to escape haha), I can tell you that their benefits hit all the bases, but there is little depth to them and they don't stretch very far. And, their wages just don't even come close. As a supervisor, I did EVERYTHING: inventory management (ordering and merchandising), training, performance management, upper-level cash management and daily bookkeeping, employee relations, customer relations, sales, labour management (adding, cutting, and helping make schedules), on top of serving customers. Essentially, when a shift supervisor is on shift, they are running the business entirely (save payroll lol). I even interviewed. How much did they pay me, you ask? $10.67 an hour, and that is in an expensive market (Vancouver). And until Starbucks recognizes that they are seriously underpaying their employees, they are going to lose those employees and will just be training them for other jobs (just like they trained me for the job I have now lol).
Starbucks is faced with the dilemma of wanting to continue an aggressive expansion plan, while facing lower priced competition and a staff that desperately needs to be paid more. Tack on rising business and gasoline costs, and climate change having unpredictable affects on the coffee crops (thus raising coffee prices). Now, how can they do all of those? Good luck, Howard. You are going to need it.
Sorry for the length of the post, but I just needed to say it.
Now for the most part people only go to the starbucks if they are running late and don't have time to stand in the line for Tim's.
