Eight days ago, Starbucks (NASDAQ: SBUX) began selling the new CD from former Beatle Paul McCartney titled Memory Almost Full. Currently, the CD is only available from Starbucks stores in all 27 countries and on Amazon.com (NASDAQ: AMZN). The CD may be the spark that Starbucks needs to get its stock going, as it is selling extraordinarily well and may lift Starbucks' June same-store sales.
Starbucks is a long-term, excellent growth story. The company currently operates almost 12,000 stores, with a stated corporate goal of growing to over 40,000 units in the next decade. This year so far has been a frustrating one for Starbucks as its stock has traded as high as $36, but is sitting at its low point right now at $27.74.
Update June 13, 2007, 4:36 p.m.: "First-week sales of 160,541 copies marked a 33% improvement over those for Flaming Pie."
The first quarter earnings for Starbucks came in right at consensus expectations: no upside surprise. The market reacted with a rather large yawn and the stock has been trading sideways since. The Paul McCartney CD may be the catalyst necessary to get the stock and the same store sales popping in sync.
I have had the opportunity these past six days to sit at the Ketchum-Sun Valley, Idaho Starbucks store for almost six hours per day. The house where I am staying is experiencing major Internet issues, so I have been hibernating at the local Starbucks using the wireless service. I have watched as this store has sold out its initial shipment of McCartney's CD and is getting the next shipment this Thursday. Starbucks' entertainment division is carefully watching and monitoring the CD sales and is replenishing its store base every Thursday.
The "local partners" of the Sun Valley Starbucks is surprised at the robust sales levels because this "is not the tourist season yet. It's the locals buying the CD." I have watched with interest as customers of all ages, male and female, have been reacting with a pleasant surprise to the new McCartney CD. The local Starbucks partners have told me that their fellow partners at several Boise, Idaho stores are experiencing the same strong sell-through.
With the CD flying off the shelves, one has to conclude that Starbucks is going to have a very strong third month of the second quarter ending June 30, 2007. The same-store sales figures for the month of June should be excellent.
By the way, McCartney's CD is absolutely fabulous. The 13 new songs are superbly done and his vocal range is as powerful as ever. My favorite song is track 11: " House of Wax," which could become a McCartney classic. He tests the range of his voice in this song and just nails it ...
Georges Yared is the CIO of Yared Investment Research. For more growth stock ideas please visit the web site.
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Reader Comments (Page 1 of 1)
6-13-2007 @ 12:15PM
Erin said...
This article is not entirely true. Paul McCartney's album is available at stores other than Starbucks and Amazon. Most stores that carry albums are carrying the new CD. I purchased mine on the day it was released from my local Wal Mart as my community does not have a Starbucks store. The album is on Starbuck's new record label "Hear", but is enjoying the same wide release as McCartney's past albums.