In a brilliant article in The New York Times, the paper points out that of all the mistakes that Starbucks Corp. (NASDAQ: SBUX) made in its expansion, picking real estate locations may have been the worst. Much of the analysis for the piece came from talking to real estate brokers. The paper writes, "In some cases, brokers say, Starbucks misjudged the risks of putting stores close to each other, leading to the decline in same-store sales."
It is astonishing that Starbucks would make such basic errors and speaks to what happened to management during the period when founder Howard Schultz was absent from the CEO job. The team that replaced him said it believed the company would eventually have 40,000 store worldwide. It clearly cut corners in terms of planning to get there.
The real trouble with the real estate location decisions is that it may take a very long time to fix. Closing stores may be easy, but finding better spots, negotiated for the space, and building out new stores will be time consuming and, perhaps, expensive.
Schultz and his minions are paying for rampant growth, and the poor souls who worked for him are paying more. Almost 12,000 will lose their jobs.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
7-04-2008 @ 7:55AM
cmyarea said...
how true, location of starbucks seems -well they are throwing up(no pun intended ) a starbucks in a spot , well, in front of a mall, next to a kfc-taco bell, in front of a hardware store in a working class , dunkin doughnuts town. 4 dunkins within one mile. Not enough pretentious students or stay at home soccer moms here to drink their burnt overpriced coffee. sorry starbucks
7-04-2008 @ 7:57AM
cmyarea said...
I noticed starbucks building next to a KFC and a Taco Bell. In front of a mall. In a town where the nearest college is twenty miles away and duckin doughnuts is surrounding the location, literally. Alot of white trash apartments and a hardware store. Kind of a stupid place to build and sell its burnt out coffee. dumb really.
7-04-2008 @ 8:46AM
cmyarea said...
bad coffee needs a good location. starbucks is doomed
7-04-2008 @ 8:47AM
cmyarea said...
bad coffee needs soccer moms and drugged out students to drink it. a location surrounded by dunkin doughnuts and working class people will doom starbucks burnt out appeal.
7-04-2008 @ 2:23PM
speculator said...
I think Starbucks is a great world-wide brand. If you aren't a commodity stock you have strong headwinds. Ge-a great company-is down 31% over the last year. Everyone likes to talk about stock for the long run, but between 1966-1981 they went nowhere. Sometimes they go down for long periods.
www.theinvestingspeculator.com
7-14-2008 @ 6:53PM
yotel said...
Does upper management ever get out of their ivory tower - closing all these stores will leave another dead building to sell. Menards is no longer building new buildings until they have a buyer for existing building. We have a Wendy's that has sat empty for at least two years. I'm so tired of McDonalds and their employees not to speak of restrooms.