Starbucks Corporation (NASDAQ:SBUX) will host its 2007 annual shareholders meeting on Wednesday, March 21, 2007 in Seattle. What normally is a quiet, simple affair, is drawing extensive coverage as both investors and analysts are looking for comfort and solid guidance. The stock has been under pressure for the last 4-6 months as investors are questioning sustainability of earnings growth.
The $23 billion market cap company is probably experiencing what is normal and expected. The growth rate for Starbucks will settle into a predictable 20-22% for the next three to four years. This is versus the 30%+ growth the company enjoyed in its early development. So what is everyone nervous about?
Starbucks is so far ahead of its nearest pure competitor. Caribou Coffee Company, Inc. (NASDAQ:CBOU), a Minneapolis, Minnesota-based competitor has about 500 stores spread out over 16 states. Caribou has yet to turn a profit and has been struggling since its early 2006 IPO. Dunkin Donuts and McDonald's Corp. (NYSE:MCD) are certainly formidable competitors, but the customer base and the destination crowd are not going to forgo Starbucks for a McDonald's coffee. McDonald's customers rarely go to McDonald's for just a cup of coffee. It's an ancillary sale, always has and always will be. Sure the coffee offerings can be improved and varied, but c'mon let's get real.
Starbucks will probably reaffirm its store growth goals for 2007 and beyond. This concept has so much room to grow, both domestically and internationally. With currently 12,000 or so stores open, and 8 new stores opening per day -- which is stunning in its own right -- Starbucks can see 40,000 stores worldwide before stubbing its toe. Starbucks will probably ease investor nerves by also reaffirming its earnings projections for 2007 as well.
The memo that Howard Schultz wrote to his teammates about a month ago has caused some investor concern. As the founder and chairman, his passion and energy have always been worn on his sleeve. His cautioning the team about potential complacency and commoditization more than likely woke up and re-energized his company's key people.
It looks like the wake-up call this week will be for analysts and investors as they are reminded what a great company and concept Starbucks is and remains.
Georges Yared is the author of "Stop Losing Money Today" and "Baby Boomer Investing"
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Reader Comments (Page 1 of 1)
3-19-2007 @ 11:49AM
TADEO said...
These type of business in the future will eventually start to change there menu into a
more healthier enviorment of selling product
coffee products will be targeted as well as
fast foods chains to sale healtheir options
in there menu... 5 to 10 years is my prediction
into the coffee business , as there is a booom
now there will be a pitfall and decline sales
of coffee products . These fast food chain
the powerful chain a making slow changes in the
food the serve also the new generation whant
better and healthier fastfood served in a gourmet
presentation ... before in the late days you had
a cup of cofffe serve out of a aluminum hot pot
with a danish or a donut ... that was it Now
its more chic ! Its Latte or Cafe Con Leche
a pinch of flavored Liquer or a Cappuchino hot
or iced ... and a French Tort with Creme de Brulee
toped with Sliced chocolate Truffles and served
with a fast foood attitude... cofffe is now very
good market but eventually will be affected by the
healthy way of life ... eating habits give it 10 to 20 years from now.
3-19-2007 @ 11:52AM
barb said...
For the 2 following reasons I do not consume any starbuck products. Starbucks uses the lowest quality Costa Rican coffee. It's not gourmet at all by coffee standards. Also, Starbucks supports the arab nations while they have pulled out of Israel. In my opinion with that business decision, they support terrorism.
3-19-2007 @ 11:53AM
TADEO said...
coffee
3-19-2007 @ 12:33PM
Bribo said...
Your crazy if you don't think people go to McDonalds for the coffee, do you see many senior citizens in starbucks, problibly not, because they are getting a senior discounted coffee at McDonalds.
3-19-2007 @ 1:00PM
arthur Rubin said...
Oh, puleeze! Starbucks is to coffee what McDonalds is to hamburgers. Both products are absolutely awful and indigestible. The thing is that Starbucks is basically a one-product company: Anuthing to do with coffee. McDonalds makes the world's best French fries, good shakes, invented chicken nuggets and has carved out the kid's market better than anyone on the planet. In that regard, Starbucks is a weak, one-trick pony. There's only so much you can do with a cup-of-Joe.
BTW, if hot tea ever catches on in this country, there are already some well-established better purveyors that will make Starbucks stand up and listen.
3-19-2007 @ 4:51PM
TADEO said...
THESE BIG FAST FOOD CHAIN HAS THERE GREAT TRIPPLE BYPASS BURGERS PLUS THE GREAT CHICKEN NUGGETS THAT IS PROCESS POULTRY THAT WITH OUT THE SAUCE TO MASK ITS FLAVOUR IT WOULD TAKE LIKE CARD STOCK PAPER...
AND HAS THAT GREAT COFFEE TO ... WITH A SIP LID
SO YOU WONT GET BURNED ...!
TADEO
3-19-2007 @ 6:23PM
Jim said...
I am 56 years old. Once in a while I go to Starbucks, but always come away with the same impression. The coffee is expensive, it's hard to find a seat and I am by far the oldest person in the place. There are no families, no elderly and few blacks or low income folks. And I wonder how the hell can Starbucks make money on a guy who comes in with his laptop and plants himself there for hours with one cup of coffee. To me, McDonalds is the better investment. It services a wider socioecomic, gender and age range of customer. I always can find a seat in a McDonalds, even at busy lunch or dinner hours. McDonalds is without pretension which is why it will never be the darling of the financial chattering class. They sell good no frills food and drink at a reasonable price and EVERYONE is welcome.
3-19-2007 @ 11:25PM
TADEO said...
THIS FAST FOOD CHAINS ARE GREAT THEY GOT NOW THE TRIPPLE DECKER BY-PASS BURGER O YES WITH THE NO-TRANSFAT FRIES , O THATS GREAT COFFEE THIS JOINTS
GIVE YOU ! WITH SIP LIDS SO YOU WONT BURN YOUR
LIPS... AND THAT CHICKEN NUGGETS PROCESS CHICKEN
WITH GREAT DIPPING SAUCES SO YOU WONT TASTE HOW
GREAT IT REALLY IS " TASTE LIKE MY MOTHER IN LAW
TOEW NAILS " COFFEE IS A DRUG , THIS STUFF IS YOU DRINK IT DAILY YOUR HOOKED ... LIKE TABACO ...
NICOTINE ... YES CAFEINE , YHE MOOORNING PICK-ME-UPPER ... ITS LEGAL STUFF ...THERE ON COLAS AND
THE MORE YOU DRINK THE MORE YOU CRAVE...
GET MY IDEA ! ??? YOURS TRUELY TADEO
3-21-2007 @ 12:07AM
D. Wise said...
I can tell you this, I just returned a coffe maker to starbucks the other day and recieved excellent service. I was credited nicely on the old one towards a new model. I was provided a cup of coffe while I waited and also a pound of coffe wich is usally provided with a machine purchase. It wasnt really about the freebiees as I am a firm beliver that theres really no free lunch! What I do belive in is service! and Nice friendly people providing it. Ill pay extra for that joe! kinda like the Nordstrom way.Most of the nay sayers out there just need to have somthing to wine about.If it wasnt starbucks it would be some other succesful company.