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Investors cheer the newer, 'leaner' Starbucks

A report today in The Wall Street Journal (subscription required) says that Starbucks Corp. (NASDAQ: SBUX) is delving into the "lean" manufacturing techniques employed by the likes of Toyota Motor Corp. (NYSE: TM). Scott Heydon has been named the coffee company's new "vice president of lean thinking," and he's visiting Starbucks joints around the country to help eliminate wasteful movements by the chain's baristas.

Yes, that's right. Under Heydon's aegis, baristas are encouraged to economize their motions to maximize how quickly they can whip up one of the chain's signature drinks. "Motion and work are two different things," he explained to the Journal. "Thirty percent of the partners' time is motion; the walking, reaching, bending." If the process can be streamlined to include less motion, therefore, Starbucks could theoretically churn out more coffee confections in less time, and possibly with fewer workers.

Continue reading Investors cheer the newer, 'leaner' Starbucks

Demand for Starbucks is still strong -- in China, at least

In the U.S., demand for the frothy coffee drinks served up by Starbucks Corporation (NASDAQ: SBUX) has been steadily waning as consumers rein in their discretionary spending. The bleak fundamental backdrop has prompted layoffs and store closures here at home -- but the java giant asserted today that it has "not seen a drop-off at all in the demand for Starbucks in China."

In an interview with Reuters, Martin Coles, president of Starbucks Coffee International, asserted that "We have seen an acceleration in our [China] business ... International is the future engine for our company." He told reporter Kirby Chien that it will take less than 10 years to open the next 350 stores in China, though he declined to offer a more specific growth forecast.

To its credit, Starbucks seems determined to be a responsible corporate citizen. Coles said that plans are underway to increase the amount of coffee sourced from the Chinese mainland. "This is about how we introduce China coffee to the world," he said. The executive added that Starbucks is angling to expand in the greater China region, including Taiwan, Hong Kong, and casino hot-spot Macau.

Unfortunately, SBUX shares aren't looking as lively as the company's Chinese growth prospects. The equity remains stifled beneath round-number resistance at the $10 region, which it hasn't finished a week above since early November. With heavy call open interest of 13,722 contracts docked at the January 2009 10 strike, look for the stock to remain pinned beneath this level as we approach options expiration this Friday.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

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Last updated: May 27, 2012: 02:34 PM

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