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Weird-Mart: Tales of the Bizarre from the Walmart AislesDespite increasing competition from companies like McDonald's Corp. (NYSE:MCD), Starbucks Corp. (NASDAQ:SBUX) is sticking to its promise to open 40,000 stores worldwide. About half of those would be outside the US. Starbucks currently has 13,000 total stores.
It is not beyond the realm of possibility to think that the big coffee shop chain will hit some resistance.
Although Starbucks and Wal-Mart Stores Inc. (NYSE:WMT) have very little in common, the coffee guys could stand to learn something from the world's largest retailer: keep your mouth shut. If you get to 40,000 stores, that's fine. However, if you don't get there, your company looks bad and the stock goes down.
Another lesson Starbucks may want to learn from Wal-Mart has to do with over-saturating the market. The question of whether Wal-Mart has too many stores comes up every month when it announces weak same-store sales.
Starbucks has begun selling food, books and records in the hopes of broadening the appeal of its stores. The company is even planning to start its own record label. Yet, over the last three months, Starbucks stock has declined almost 18% and the market obviously has some concern about whether its rapid growth can continue without cutting into margins.
Talking the talk may not work.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
3-14-2007 @ 1:49PM
miffedone said...
Hilarious. Starbucks can "learn" from Wal-Mart, whose stock has been flat for 5 years, whose SSS trail the industry, who is under seige on every front. Because Starbucks stock is down 18% in the last few months? Big surprise, there's hardly a year goes by when Starbucks doesn't zoom ahead, then retrench.
Starbucks talks about so many stores because of near-sighted analysts who yelp about oversaturation, even as they walk past 4 crowded Starbucks locations on their way to the rest room.
Starbucks isn't hoping to "broaden the appeal" of their stores, they're looking to pull more dollars out of the wallet from the throngs who already come in. Nobody is going to go to Starbucks to buy an album, but they will buy an album when they are already there.
Your analysis is wrong on just about every metric. Good show.