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Starbucks, the wake-up call

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.

Continue reading Starbucks, the wake-up call

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Last updated: February 12, 2012: 03:52 AM

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