Starbucks (SBUX) plans to calm investors

Posted Mar 17th 2009 3:00PM by Douglas McIntyre
Filed under: Management, Annual Meetings, Starbucks (SBUX)

Since shares of Starbucks (NASDAQ: SBUX) have dropped so sharply over the last year, the company keeps coming up with ways to convince its investors that it has a handle on things and can run the coffee retailer well in a harsh environment. It will make another attempt at getting its arguments across at its annual meeting Wednesday.

According to The Wall Street Journal, "executives are expected to outline a plan to weather the recession that includes an effort to make Starbucks products seem more affordable, and reassure investors that the company is on track to cut $500 million of costs by the fall."

That seems like a counter-productive approach. Annual meetings are usually carefully planned to keep investor participation to a minimum and management's time is laid out so that the firm can get its message across with a minimum of interference. The environment rarely makes it a credible venue for arguing a company's case. Annual meetings are, in effect, a dog-and-pony show.

Wall Street will need more than an annual meeting to turn around its perception of Starbucks. Over the last two years its stock has dropped 65%. The fact that it has closed stores and laid off thousands of workers has not helped change investor belief that consumers will not buy expensive coffee. It has created a new "value meal," but it is still expensive compared to breakfast offerings at other food retailers.

If Starbucks wants to make a case that it is doing better, it will have to do it the day its next earnings are announced. Investors want hard data.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Tags: annual meeting, AnnualMeeting, inthenews, SBUX