Starbucks (NASDAQ: SBUX) is in such a pickle. On the one hand, it's famous for its java-room atmosphere and its quality coffees that cost an arm and a leg to acquire. On the other hand, growth is gone and its stock is in the dumps, forcing management to do what is necessary to bring traffic into its locations. According to this article, the company will be experimenting with vouchers and discounts at many of its stores throughout the summer. One example given involves a free iced coffee promotion in several major cities.

Just the other day, I wrote about increased competition in the coffee wars from McDonald's (NYSE: MCD), which continues to bolster its java strategy. Things are getting tough out there for Starbucks, and it's a shame that the company has to go this discount route. It's a funny thing when it comes to sales -- people get used to them awfully quick, and in the case of Starbucks, it sort of blemishes their model of making people pay up for their exotic lattes. Starbucks needs to be careful and not be too aggressive in offering discounts. Of course, the natural response to my assertion is, if the company is doing badly, isn't it management's responsibility to step up and get people to cross the threshold of their locations? It sure is, but one thing I've always noticed when any kind of retailer isn't performing like it used to is that it doesn't tend to implement new marketing campaigns that focus on the experience a consumer gets when she walks through the door. I think that can be more effective than waging a price war.

That's what I would say to Starbucks. Create an innovative, unique marketing campaign based on the image of Starbucks and try to keep people paying those high prices. Granted, that's easier said than done, considering everyone has a tight budget these days. Giving away free coffees is fine on one level, but it's a slippery slope for a company that based its model on expensive beverages.

Disclosure: I don't own any company mentioned; positions can change at any time.

Patrons and employees alike await the final decision about which Starbucks (NASDAQ: SBUX) stores will be closing and who will be getting kind notes explaining why closing 600 stores is necessary, making their jobs not.

According to a report in The Wall Street Journal, about 50 stores have already been notified that they will be closing by July 31, and the list will be made public by July 15. The Journal writes of anxiety for the Starbucks faithful who have come to appreciate the caffeine brew and do not have satisfactory alternatives.

There are two stores in walking distance of my office and when Starbucks opened the second one about 18 months ago I was very surprised. However, I will not be surprised if the newer store is among the casualties.

McDonald's (NYSE: MCD) has always been known for its famous French fries. Interestingly enough, though, it seems to me that the fast-food chain is becoming known these days for its coffee. I never thought McDonald's would invest as much as it has in coffee, but it looks like it's doing the right thing. According to this Bizjournals piece, McDonald's is putting its weight behind a coffee-bar initiative called McCafe. The program is being tested in various locations now and will be available nationally sometime next year.

I love the timing on this. After all, Starbucks (NASDAQ: SBUX) isn't doing so well. Not only is its stock hovering around 52-week-low territory, but the java king recently announced some store closings. That's almost unimaginable. Remember the days when every street corner needed a Starbucks? Yeah, those days are long gone. And I think McDonald's is smart in attempting to expand the brand equity of its coffee-brand portfolio. People need more of a reason to go to the palace of the hamburger-serving clown than just Big Macs these days, since the Big Mac and its various fat-saturated colleagues aren't as popular in these health-conscious times. I'm not saying drinking coffee is an exercise in life preservation, I'm just saying that it's good for McDonald's to focus on less controversial fare.

This significant foray into coffee is arguably a key reason for the company's stellar stock performance over the last few years and its competitive edge against rivals Burger King (NYSE: BKC) and Wendy's (NYSE: WEN). According to the AOL Finance snapshot, McDonald's is very much in the green for every timeframe save for year-to-date, which sees the stock down less than 1%. That's strength. McDonald's is a little below its 52-week high, and it might make for an interesting investment idea. At the very least, you can look forward to its McCafe program.

Disclosure: I don't own any company mentioned; positions can change at any time.

I hemmed and hawed when I saw Jennifer Openshaw's piece on MarketWatch a few weeks ago; her opinion was that Starbucks (NASDAQ: SBUX) would recover much of its lost value in these past several months of sluggish sales, rising milk costs and slipping coolness, no matter what the naysayers, say. Her argument: that Starbucks was great because of its atmosphere and general quality standards in coffee. While I certainly agree that Starbucks is still an attractive "third place" and would pick Pike Place brew every time over McDonald's or Dunkin Donuts coffee, I hesitated. Had management already made too many mis-steps? Had hubris got the best of the 'Bucks?

The latest news; that Starbucks management has plans to close 600 stores in the U.S. this year; could be an indication of positive things in the company's stock price. It certainly had traders in after-hours activity eagerly snapping up shares, sending 72 cents, or 4.6%, to $16.34 around 2 a.m. I'm always leery, though, of a huge strategy reversal such as this. In my analysis of Starbucks' financial statements, the company spends about $300,000 to start a new store, and this is largely funded through cash. Management regularly offers old furniture and equipment to its high-ranking employees when upgrading or shutting down a store, so it's unlikely that much of the cost will be recouped. Doug McIntyre noted further that Starbucks will continue to pay more millions in lease costs; the company is known for locking up prime real estate with serious long-term lease agreements. Sure, the loss won't affect the cash balance much, and the charge will be "one-time," so the financial picture will still look rosy in a year when the charge has dropped into "historical financial statements." Investors don't look back.

But by acknowledging that some $180 million in costs, not to mention the hundreds of millions probably spent to train and employ staff at these locations, was a big waste of money, Starbucks management is owning up to a future of slow growth.

Starbucks (NASDAQ:SBUX) can't seem to do well in the US. People who feel poor don't want $5 coffee and the chain seems to have built too many stores here. The company has even gone so far as to close some.

But, bright on the horizon, the Seattle-based company sees Europe as a potential region for expansion. So, the company will open 150 new stories on the continent. According to Reuters, "The coffee shops are to be opened at airports and railway stations and come as the chain looks to offset a slumping U.S. market with overseas growth." The new stores will be franchised and run by a UK company called SSP. At least that probably means Starbucks will not be taking all of the financial risk.

Starbucks may find that a recession in Europe is likely to keep people out of expensive coffee shops just as much as its has in the US. But, the new push into the continent has a more telling aspect. Starbucks does not have the taste for risk that it once did. There was a time when the company would have taken all of the risk and all of the reward to push more aggressively into a large market.

Starbucks is not only suffering from slowing sales. It is getting timid.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.

Drinkers of fine coffee may turn their noses up at Folgers or Maxwell House, but these two brands have been household names for decades. And they're not the just offering plain, old coffee for the commoners anymore. They've both added a variety of coffees to their product mixes in an effort to lure more upscale (picky? elitist?) coffee drinkers to their brands.

Folgers, one of the Procter & Gamble (NYSE: PG) family of products, has added roasts such as Black Silk, French Roast, Gourmet Supreme, and House Blend. They've also got a line of flavored coffees that include Crème Brulee, Vanilla Biscotti, and Caramel Drizzle. You will also find instant cappuccino in French Vanilla and Mocha Chocolate flavors, and the trusty old plain instant coffee is still available. I've had it, and it's not all that bad when you're in a pinch!

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.

Oh, how the sugary have fallen. Ten years ago, even five, you and I both know how this would have come out. In the standoff between longtime national fried-dough pusher Dunkin' Donuts and upstart sweet freak Krispy Kreme Doughnuts (NYSE: KKD), Krispy reigned supreme. The chain was rolling out new franchises as fast as dough circles could parade around its restaurants on shiny metal racks, and each time it did local police stations did overtime directing traffic.

Somehow, the mighty fell after the considerable sugar high, largely connected to poorly-managed finances, badly-handled expansion, and a sudden national fear of carbohydrates. All the while, Dunkin' Donut managers everywhere continued to plod along, making the doughnuts, and quietly stirring a blue-collar breakfast revolution. One day America woke up and realized, hey, Dunkin' Donuts' coffee is good! Someone named it "Better than Starbucks" and it soon became clear that the product guys had realized something: we make a lotta money off of coffee. Actually, more than half of the company's revenue.

I must admit, that even though I am from Seattle and grew up with Starbucks (NASDAQ: SBUX) in my backyard, I am a bigger fan of Folgers coffee than I am of Starbucks. That being said, as an investor, I think it bears to take a long, hard look at Starbucks shares at these levels.

Its earnings report was lousy. As reported in Reuters: " The company, which has been trying to revive business in the United States, said it expects first-quarter earnings per share of 15 cents. Wall Street analysts, on average, had been expecting earnings of 21 cents per share, according to Reuters Estimates. In the same period last year, Starbucks earned 19 cents a share." Yikes. Forget about the fact that Starbucks missed by 6 cents per share. Year -over-year its EPS dropped by 4 cents.

So why be optimistic? With the stock trading down under $16, In think that it bears watching as a contrarian, turnaround story. I think that as part of Starbucks' turnaround strategy, it understands the need to get back to basics and start doing the things that made them successful. This plus the potential windfall that its China business could produce, makes this an interesting story for the future. I doubt that this is a stock that's going to make a major move over the next month or two, but for investors interested in a turnaround story and with a bit of patience, Starbucks may just fill the bill.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer's fund has no position in any stock mentioned, as of 4/24/08.

When your business is struggling with the competition and your stock price down, it's time to focus on the fundamentals that got you the leg up when you first started. At least that's what Starbucks (NASDAQ: SBUX) seems to be thinking these days. Click below for video.

Interested in maybe hearing your voice on the BloggingStockCast? Leave a comment for the show by calling 567-226-4583 and leaving a message!

(I apologize for the temporarily wrong number on the video, the phone number handling the video there died! I'll get it right with tomorrow's BloggingStockCast -Tobias)

We have seen this play before, and there are two scenarios as to how it could end. Starbucks Corporation (NASDAQ: SBUX) is being challenged like never before, having saturated the market place in some locations it is now facing the challenges of selling expensive coffee in a slowing economy.

Would you rather pay $4 for a cup of coffee or a gallon of gas? You can find cheaper coffee but you have few options to find cheaper fuel. Amid the already difficult operating environment Starbucks is faced with competition from the largest restaurant chain in the world, McDonald's Corporation (NYSE: MCD). McDonald's is looking to steal its morning thunder with competitive offerings at a far lower pricing structure. The threat is very real no matter what spin Starbucks puts on it.

This brings to mind two similar situations both involving Microsoft Corporation (NASDAQ: MSFT) and past competitors. Early on there were two word processing programs that together probably had 90% market share. Those were Wordperfect and Wordstar. Both of them were fine programs offering strong features, and now they are nowhere. Microsoft displaced both of them with MS-Word integrated with their Office suite of products, and is now king.

When Starbucks Corp. (NASDAQ: SBUX) brought back founder Howard Schultz to revitalize the company's image, product line and customer experience, the coffee chain's edge had disappeared. It had lost customers, revenue, the niche and most important -- the overall experience -- to newer competitors. That was not to say Starbucks still was not king, but it become diluted in the race for newer growth.

Well, to heck with that. Schultz slowed down growth after re-emerging as the company's CEO early this year, deleted breakfast sandwiches from the menu, retrained the company's baristas and ensured that fresh-ground coffee smells were the number one priority for every customer coming in the door to experience. But Schultz isn't stopping there. He also wants customers to push back to the company using MyStarbucksIdea.com. In other words, the coffeehouse's own social networking site. Schultz wants to empower his customers to help shape the future direction of the coffeehouse he founded.

This is more than a blog or a forum -- customers can discuss ideas, argue about them, post new ideas, vote on ideas and form more opinions on improving the Starbucks experience. Well, I though this was exactly what Schultz was busy doing these days? Is he really interested in what every Tom, Dick and Harry thinks?

Will customers really give him all this feedback? I'm skeptical. I agree that balancing the customer's needs and the business's needs is critical -- one can't overpower the other. Still, will this even have an effect on Starbucks at all? If it really is this interested, it needs to market the MyStarbucksIdea website just as much as its mocha lattes. Give every customer notice that they can have a voice in this.

Starbucks (NYSE: SBUX) lost a class-action lawsuit, according to this article, centering on the sharing of tips between baristas and shift supervisors. Erstwhile barista Jou Chou filed the legal complaint in 2004. Class-action status was eventually granted, a move which then involved up to 100,000 employees in the company's California coffehouses. San Diego Superior Court Judge Patricia Cowett doesn't believe that employees in managerial positions should share in tips given to the baristas, and she paved the way for $100 million in back gratuities to be distributed to those so affected.

Naturally, Starbucks disagrees with this ruling and will appeal. A spokeswoman for the company, Valerie O'Neil, says this is nothing more than an example of "abuse of the class-action procedures in California's courts." This is a confusing issue, to say the least; shift supervisors do find themselves sometimes serving coffee to patrons. However, it seems, in my opinion at least, that the judge is correct in her interpretation of California law -- tip pooling cannot benefit those in managerial positions. We all know why it is done -- tips essentially subsidize the pay of supervisors/managers, and this is a beneficial thing for Starbucks.

However, I believe Starbucks is on the wrong end of this argument. It's too bad; Starbucks right now is fighting to regain the regal java status it once took for granted. Nowadays, joints like McDonald's (NYSE: MCD), Burger King (NYSE: BKC), and, of course, Dunkin' Donuts, are vigorously competing for their share of the coffee spoils. I don't drink coffee, but I know that there is money in the stuff, and that's why I think that, with all of its current troubles, Starbucks should work to put this legal action behind it so that it can concentrate on the bigger issue of significant sustainable growth. The negative publicity is a concern, and although this distraction won't, by itself, derail Starbucks, it is still nevertheless a distraction.

Disclosure: I don't own any shares of any company mentioned here; positions can change at any time.

Starbucks Corporation (NASDAQ: SBUX) is struggling and with Howard Schultz back in as CEO, the company is looking to get its sales moving upward again. One possible strategy? Free coffees, discounts with a rewards card, and a possible expansion of the company's $1 coffee campaign -- with free refills.

Will these plans help boost sales in the midst of a struggling economy? Probably. But, if I were a Starbucks shareholder, I'd be concerned about the damage to the brand. The fact is that Starbucks has become one of the best companies in the world -- that's not an exaggeration -- with an emphasis on quality and customer experience that made it, for a long time, essentially immune to the competitive pressures that other companies deal with.

If Starbucks has to resort to value-oriented marketing like every other company does, then Starbucks is no longer as special as it was in its heyday as a great growth stock.

That said, the stock is down more than half from the 52-week high it reached in 2006, and the company's woes may already be priced in -- leaving the company's strong brand undervalued.

Starbucks Corp. (NASDAQ: SBUX), the epitome of high-priced coffee and latte beverages, saw a drop-off in customer traffic in 2007. Founder Howard Schultz even returned to the CEO helm to try and figure out why customers stopped coming in its stores. He even announced some store closures and the banishing of breakfast sandwiches that were competing with its trademark coffee smell.

This year may see much of the same customer traffic patterns though it may be due to different reasons. With many people predicting gas prices of $3.75 to $4.00 per gallon by this summer, will customers simply stop buying $4 cups of macchiato? They already are in droves. Add that to the rising cost of coffee, and Starbucks may be in for a world of hurt in 2008.

In the meantime, Schultz is making changes at the top of the ranks, starting with the "retirement" of Launi Skinner as head of U.S. operations. Skinner's performance could be seen as semi-disastrous, so she'll be "spending more time with her family" while Cliff Burrows steps in to take over. Burrows formerly was president of Starbucks Europe, Middle East and Africa stores, but he'll have a much larger challenge in the U.S.

After Starbucks saw a share price decline of 43% last year in addition to a 13% drop this year, Shultz has to do something to stem the bleeding. Shoring up that trademark smell inside stores, limiting growth and decreasing store/brand dilution and stuffing in some new blood may do the trick, but 2008 won't be easy for the coffee retailer in way, shape or form.

Nope, I've never been to a Starbucks (NASDAQ: SBUX) before, and I don't plan on entering one soon; coffee doesn't interest me in the least. That doesn't mean I can't see what's going on with its stock, however. I'm always on the lookout for stocks of big brand names that have had incredible runs in the past but are currently experiencing a nice pullback in share price.

Over the past year, Starbucks has performed very poorly. As the company's chart indicates, the stock is out of favor. But is it due to come back? The chart I just linked to shows that the stock is below its 50-day moving average, but not too far below. It also shows a couple of high-volume buying days, compared to one massive-volume day of selling. In addition, the stock is currently well below its 200-day moving average. At a forward-looking P/E of less than 20, and at a very reasonable PEG ratio, Starbucks is looking very attractive to me.

But, the company is experiencing a lot of competition from Dunkin' Donuts, McDonald's (NYSE: MCD), and Burger King (NYSE: BKC) -- yep, fast-food joints are pushing coffee. Plus, the stock is flirting again with its 52-week low in an overall terrible equities market. Bottom line: Keep this one on the watch list, but be careful about putting money to work here just yet. In my opinion, I'd rather see some strength in the stock before stepping in with my portfolio's capital.

Disclosure: I am looking at Starbucks as a potential buying opportunity, and could purchase shares of the stock sometime after this post.