Guardian UK: Starbucks ..... Ground Down?

[marmar]

Wall St gets palpitations over caffeine fuelled growth
Earnings are still strong but American customers may be starting to trickle away

Andrew Clark in New York The Guardian, Monday January 7 2008


With its green logo, enticing muffins and semi-Italian vocabulary, Starbucks is a familiar haven to coffee lovers around the world. But as new outlets open on street corners at a dizzying rate, doubts are mounting on Wall Street about just how many "venti frappuccinos" the public can stomach.

Rising dairy prices, an economic downturn in America and a cut-price caffeine onslaught from McDonald's and Dunkin' Donuts have set alarm bells ringing about the prospects for the ubiquitous Seattle-based chain.

Once a reliable investment for the firm's constant growth, Starbucks shares slumped by 42% during 2007, making them one of the worst large-cap performers on the Nasdaq exchange. A downgrade by analysts at investment bank Bear Stearns prompted a further 11% plunge last week.

In the final quarter of the year, Starbucks revealed what many had feared: although business remains strong in Britain and other overseas markets, footfall at Starbucks' 10,500 American outlets is slowing down. The average number of transactions per US store was down by 1%.

"They have to slow their growth - they've been growing far too fast," says Howard Penney, a restaurants analyst at broker Friedman, Billings, Ramsey in New York. He says Starbucks is following a path familiar from Coca-Cola and McDonald's and is in danger of facing a revolt by shareholders.

"Act one - a great concept starts and grows, becomes a global behemoth and ultimately grows too fast. It takes two or three CEOs to realise they've hit a level of maturity that means they've got to adjust." .....(more)

The complete piece is at: http://www.guardian.co.uk/business/2008/jan/07/starbucks.useconomy

[noto]

1. Popularity in trending stocks is like politics

Just the voting populace is much smaller.

Starbuck's is the largest retail chain the world, and opens about 1 store ever 6 seconds. So it seems like a buying opportunity, imo.