First of all, anyone who has eaten in a Starbucks can testify that food is not its forte. I just don't see people craving their morning Starbucks muffin. Plus, in places such as New York City, people have tons of breakfast options ranging from fast-food joints to delis to food trucks. They view Starbucks as a mid-afternoon indulgence. At least, that's how I thought of Starbucks when I worked in New York.
Getting people to change their breakfast habits will be difficult. In tight economic times, people will gulp down their morning meal at home. If they do eat out, they will look for cheaper alternatives than Starbucks. McDonald's Corp. (NYSE: MCD) has made serious inroads in the breakfast market, as has Dunkin' Donuts. Sorry, Starbucks lovers, but I found their coffee far less biter than Starbucks. I even have two bags of Dunkin' java (regular and decaffeinated) in my house.
Starbucks got in trouble from over-expansion. The company said in July that it would close 600 stores on top of the 100 locations that it previously planned to shutter. But those plans did not go far enough.
I recently had to meet a colleague in New York at a Starbucks. It was confusing figuring out which one he meant since there must have been about a dozen or so of the coffee shops in midtown Manhattan. In places like Washington, some streets have Starbucks across the street from one another. Don't stores located so close to one another poach each other's sales?
Though Starbucks shares are trading up today, the company will need to take even more drastic action for the stock price to rebound from its more than 20% decline this year.