Starbucks stock hammered after company warns of a weak 2008

Starbucks says [read the news release] second-quarter earnings will likely miss analysts' expectations, and full-year earnings per share will probably be "somewhat lower" than last year's. The company blames "the sharp weakening in the U.S. consumer environment." At last check, Starbucks' stock was down more than 11% in after-hours trading. (Read the Associated Press story)

Comments

[col]

Well he's smart to take the hit right after returning. Howard should try and make things sound really crap nowao that when the company picks up (as it will) the change will look more dramatic and he'll get more credit. He's not exactly the first CEO to try this.

[col]

edit: "nowao" should be "now so"

[earnestobserver]

to all of you who love to praise schultz....

stock is down about 120% since he came back. i'm sure you still might be happy with your fake barista job and pike place roast... but the owners of the company are certainly not happy

[Boring Market]

If there really is a "the sharp weakening in the U.S. consumer environment" then how does Apple Inc. blow through their earnings. Apple is one of the consumer sensitive companies out there and still their profits increased 36%. Starbucks stills needs to turn it around, Shultz has seen this decline from his Chairman post. His new title as CEO isn't going to change anything. There is something seriously wrong here and a sudden 11% decrease in stock price is the icing on the horrible cake.

I have always been bullish on Starbucks and I am a loyal shareholder, but this is not a economic problem (or a consumer spending problem)...this is a Starbucks problem.

[RalphZilch]

it doesn't change the sentiment, but i think you mean the stock is down 60% or so from its historic peak. (being down 120% is not really possible)

[AnotherEarnestObserver]

How can stock fall 120%? That makes no sense. So, what, the investors owe money now? I don't get it. Help me out here. Do you mean it fell 20% since he came back? That would make more sense since it was somewhere around $19.50 when he came back and today it's going to close around $15.50. If one excludes today's fall of Starbucks stock and compare it to the Dow Jones Industrial Average, you'll see Starbucks' stock is not too completely out of whack, even though it still sucks. So, earnestobserver, did you skip math class this week or are you just a complete douchebag?

apple can sell $3000 computers all day long. sbux can't sell a $3 cup of joe?

its not the economy, stupid.

[Bob]

Maybe Schultz and his crew should take paycuts? Oh no, of course those will come from those who can least afford it, as they always do.

[Terry]

While I am upset my stocks are worth much less now, I am not worried.

This is what people call "taking a bath"
Announce horrible news to prepare for the good times to come.

Apple's sales is an indicator of the economy? I don't think so. People who buy Apple are rich. Rich people aren't worried about the economy because they have money already.

[Jim Lane]

Schultz scapegoats the economy. The loss is due to the fact that Starbucks has lost its way and investors seem not to have any confidence in his fixes.

Everything else out of his mouth is the proverbial bull's brown stuff.

jim

[FiscalReality]

@ Terry - That is the point, I think. The $3K 'puter is somewhat insulated...it spoke to a narrow market that was and remains relatively wealthy. SBux $3+ cups of warm brown water (with or without dairy) are a minor luxury that adds up quickly by the week/month and is *very* easy for people to get their head around "cutting" toward making ends meet. If the economy continues to circle the drain, Sbux is likely in trouble.

[Anonymouse]

Apple is a "niche" product. Starbucks is a victim of its own ubiquitousness. Costs too much to run a gazillion stores AND keep up with the quality. There are other chains out there with less stores, but they then have the money to invest in making sure their coffee is good.

It's not the economy. People won't quit drinking coffee. They'll give up their cars and bike to the cafe sooner than they'd quit showing up for their caffeine. Starbucks simply needs to quit over-roasting all of its coffee product. Even Pike Place leaves a taste like you've been sitting too close to a campfire - and it's what they're marketing as their "smooth" stuff?

It's not the worst coffee in the world - I go there once in a while for a change of pace, and they offer add-ins that other places don't have. But I know of few people who go to Starbucks every day because they honestly think they're drinking the best quality coffee their money can buy. And that's going to continue to be the problem. They need to scale it back and look again at the coffee they're offering - not re-market what's already there.

[kilroy]

Anyone out there with a prediction on how much longer I'll be enjoying these great Clover pressed Konas before they're prepared by a trustee rather than a partner?

[Darleen]

Ah, it makes me laugh how everyone on here has the fix for starbucks. My question is why don't you run a billion dollar company? You all obviously know what is wrong and how to fix it. Give me a break!

[Proud Barista]

"Ah, it makes me laugh how everyone on here has the fix for starbucks. My question is why don't you run a billion dollar company? You all obviously know what is wrong and how to fix it. Give me a break!"

@Darleen

You're right, most people on this forum are not CEOs of Fortune-500 companies. We are shareholders, partners, and customers of Starbucks. Which, IMHO, gives us a right to speculate and discuss the future of SBUX.

Why are you so critical about people politely discussing a topic they are interested in, just because we don't get paid millions of dollars to do it?

We don't need negativity on this site. Thanks.

[Melody]

Did anyone else notice that the article linked says that Starbucks has long-term goals of having 40,000 stores.

Yikes. 40,000 is a really big number. That's a lot of coffee.

Honestly, I think to survive, if they're really going to grow so huge, Starbucks will need to differentiate stores more.

Affluent markets would get a more premier Starbucks with the most expensive beans (bringing back Yirgachffe) and a Clover. Low volume stores in affluent areas would get La Marzoccos. Some stores would really only have basic stuff available.

Otherwise, and call me crazy, but how do you distribute that much of your beans? Is there enough Arabian Mocha Sanani for 40,000 stores?

I just can't imagine how it would work to have that many Starbucks.

[earnestobserver]

sorry about my math error.... busy day at work and obviously not paying enough attention

[adam]

I just don't see much progress at the store level. New marketing but that's about it so far. I tried the Pike Place coffee for the first time today and was unimpressed mainly because it tasted old. The store was in a mall and at the time was being run by three college age girls who were busy yapping about some ice cream place they went to.

There seems to be no discipline in the stores I frequent. I'm not saying to rule by fear but it would be nice to see some leadership. If you start to make an example out of bad employees by firing or discipline them the word will get out that the company is serious about quality. But in order to do that you need managers who care about quality and know what it means.

The whole three hour training and the signs proclaiming "Best Espresso in the 'hood" have been nothing more than a gimmick. I drink americanos with no sugar and a little dairy so I am sensitive to shot quality and I can tell you that nothing has changed since the retraining. The mindset is still the same as it was before. Is it really any wonder that things aren't going that well?

The problem is (at least at my store) the shift supervisors and baristas are too friendly with each other. Sure that's a good thing, but shifts avoid having to put their foot down since everyone is friendly. There comes a point when a manager needs to manage and that doesn't mean you can't be friends.

[The Dripp]

Honestly, this is going to be another year to year and a half and there isn't much that Starbucks is going to be able to do about it but avoid the lose of market share to McDonald's or Dunkin' Donuts. The economy is really going to take its toll.

This should be the time that the overseas opps shine but the ripple effect of The U.S. economy is already beginning to take hold in some parts of Europe.

The worst thing Starbucks could have done is let the words "Starbucks coffee & McDonald's Coffee" share space in the same sentence. Huge PR error there, but again, it will be corrected and any share price drops means buying opportunities for long term players.

[kilroy]

I spend a lot of my time in Seattle and all I hear about is howard and his actions regarding a failing NBA basketball team--now failing Starbucks.Old howard has to choose where to direct his time; he can't do everything as we are seeing.What's it going to be---the Sonics or Starbucks. There are thousands of partners out there who should be really concerned that howard appears to be spending most of his time directed toward multimillion dollar basketball action at a time when the company should get full attention.

[Ralphzilch]

I think melody is on to a good idea. the first (and most obvious) place to start is to differentiate their branding between the coffee "kiosks" (in the mall, target etc) and the stand alone stores.

make a local "flagship" store... have the clover, old fashioned espresso, fresh beans ... etc. and the premium prices to go along.

let managers run their stores with the DM breathing down their neck and you'd be surprised how quickly things turn around.

let managers run their stores without the DM breathing down their neck and you'd be surprised how quickly things turn around.

[Melody]

Kilroy,
I noticed that. Everyday in the news is something about Howard Schultz and the Sonics. Weren't you shocked that last night at right around 8:30 pm, the Seattle Times had already updated their site with a pdf of the Complaint filed by Schultz's counsel in the derivitive action to essentially un-do the 2006 sale of the Sonics.
http://seattletimes.nwsource.com/ABPub/2008/04/22/2004366926.pdf
^ If you look at the declaration on the PDF it was signed by Uncle Howard on the 22nd, and the complaint was filed that day, and made on to the Seattle Times by last night! Somehow that struck me as fast.

And though this is neither here nor there, I swear it seems like the Seattle Times is using the most unflattering photos of our Uncle Howard that they can find:
http://seattletimes.nwsource.com/ABPub/2008/04/22/2004338825.jpg

Howard really much more photogenic than that picture makes him out to be.

I guess I shouldn't say "our Uncle Howard" since I'm not a partner, but occasionally I have remember that I don't work for Starbucks. ;)

Ralphzilch, thanks for the props. I've always been a little leary of the idea of different classes of Starbucks stores, but I finally think that it's the only way it can work at the size that Starbucks is now, and will grow to.

[Cali ASM]

Adam,
I totally agree with you. We need more managers (and parnters in general) who care about quality, professionalism, and maturity. Maybe this won't solve all the problems, but it's could be a start?

Anon@8:26:41,
I totally agree with you too!!! NO MORE MICROMANAGING DISTRICT MANAGERS. In fact, let's train our SM/ASM's to be better overall managers and cut the DM positions completely making managers accountable to RD's instead. This would mean more individual control over stores by SM's and less influence from "behind-the-desk", non-retail partners who "think" they know what's going on but have had little to no experience running a store.

What does everyone else think? I'm really interested to get others' opinions regarding these suggestions.

[Von B]

It's not the economy? California home forclosures up 327% and it's not the economy? It is assinine to suggest otherwise. Starbucks is doing everything it can to weather the storm and Pike place (ie everyman's coffee) is going to be our anchor during the rough seas ahead. It is the economy stupid. when people are feeling the pinch,(and if you don't believe the average american is right now, you are a fool in denial of reality) they start to cut out unneccessary luxuries, and the starbucks routine unfortunately takes the hit, as caffeine can be purchased and brewed in your home, for alot cheaper.

[slightly confused]

"In the interim, we are rigorously managing our expenses and seeking additional opportunities to reduce costs," Schultz said in a release.

"In February, Starbucks announced it was laying off about 220 support staff who worked at the coffee retailer's Seattle headquarters and in field operations, and would leave about 380 open jobs unfilled."

Sooo, why would Starbucks spend millions upon millions of dollars for the CoffeeEquipmentCo. (makers of Clover)? From what I understand, CoEqCo, along w/ their employees, are now under the Starbucks' umbrella. In addition, the Clover is a niche-type of apparatus at best and (in its current form) does not mesh well w/ Starbucks' operations, roasting methods, or many of the stores' layouts.

This seems to be a confusing and incredibly expensive move for a company that is trying to rigorously manage expenses and reduce costs.

So is Starbucks trying to cut costs or are they trying to prove to customers (who the majority do not care enough about high-quality drip coffee) that they're all about the coffee?

I'm concerned because I am a shareholder and I'm receiving mixed messages.

CALI ASM - if things continue the way they're trending, i don't think it'd be long before they'd HAVE to do that. they already eliminated 600 positions. eventually the operations side would have to take a cut to satisfy shareholders. but i have a feeling my store would be more successful if my SM was actually allowed to run it - he knows what's best but is told what to do all the time.

i've noticed less traffic the past 2 days - gas hit an all time high in our region and i have a feeling that $3.60+/gallon has a lot to do with it. one of our partners spent $75 to fill her car. at less than $8/hr wage, that's tough to deal with. i myself have stopped eating out as much. when the economy, and gas, get so pricey, something has to go. for a lot of people, that's starbucks.

it's sad, but true...

Wow, it amazes me how some of you above so readily discount the effects of the US economy on the fiscal results of Starbucks. I suspect your the same individuals who would also argue that we are not, in fact, in a recession.

If you really beleive that then there is no help for you and enjoy the sand that you've got your head in.

Food and fuel prices are skyrocketing and will not be coming down anytime soon. In the case of oil, never. Read Hubbert's Peak, it has predicted what's going on right now with world oil supply extremely well. Combine that with demand expectations of China & India............mark my words you will never see "cheap" gas ever again.

Disposable income is rapidly decreasing, credit is much harder to get and personal debt is at record high's. These are not good factors especially when combined and are big drivers as to why the dollar value is decreasing globally.

In this enviroment, it is expected that a business like *$ will suffer. I agree with the above that McD's is maintaining because it is a staple commodity, food, whereas coffee is not. Also regarding Apple, I am willing to bet that the main drivers of those results came from international business. Businesses that have a good diversified international presence (IE: Brazil, Russia, India & China) where there are remarkable growth economies (for now anyway)do not have the same reaction. Starbucks does not yet have the same international penetration yet to offset domestic impact. Domestically almost every retailer is in the same slide that *$ is. Starbucks is not a unique conditon.

Anyway, do your own research and think for yourself. Be skeptical when taking in others opinions.....on anything really. For me, I'll be staying out of debt, working and saving as much as I can, investing wisely after much research and learn to live more frugally since basic expenses will never be as cheap as they once were.

Good luck

[cup o jo]

Stocks tumbling=Pike Place

[Trader on Confidence]

If you are smart you wil buy like crazy at 15.25 If it gets that low. Make a position and hold on to it. Remember, a lot of people will be dumping the stock on the opening but there are going to be as many buyers.

I'm long with sbux and expect to increase my holdings of this stock at the open tommorow and I'm going to hold on to it!

i wish my gas was 3.60$ a gallon...

[Jim Lane]

Foreclosures are just that. They may OR may NOT have a direct link. Schultz is using that as a whipping post to keep everyone from looking too closely at Starbucks (his) mismanagement. Thus: scapegoating.

[Pat Nerr]

just a few things to think about... the decline in sales, comps, general financial performance and stock price has taken place over the last 2 years... the punch to the belly from the mortgage market has really been over the last 10 months... do you really think that Starbucks downward curve is an advance indicator of a slumping economy?? From my recollection, an affordable luxury is something people will turn to in a downward turning economy and Starbucks has always enjoyed nice profits even during bad times... Perhaps it's not the affordable luxury it used to be... and the last couple years of building complexity in the stores and behind the scenes along with wasteful spending and creating and maintaining programs that have no business driver have contributed somewhat to the pickle the company is in... just maybe. Not to crap in the oatmeal of happy partners... just a heads up that you should be actively involved or concerned at how that "behind the scenes" is run. Should the SSC be replacing carpets and then turning around to install hardwoods in the SSC just cuz Howard isn't happy really necessary?? Does the company need to spend so much on Leadership development that clearly isn't getting the bang for the the buck when the front lines needs innovative and effective training? Should the top execs also be able to enjoy business travel to personal speaking engagements in such concerning times for the company? The cost cutting seems to be something like the American-pseudo diet... Cheeseburgers with diet cokes... cutting headcount that does actual work in favor of keeping leaders who are on half-time schedules doesn't jive in my brain.

As far as the foreclosure problem in the US... It was bound to happen when silly people who really can't afford a home sign up for loan programs they didn't really research or understand combined with a mortgage profession that really should have had more rigor around it like the real estate profession has with licensing and education... c'mon, they just implemented mandatory education and licensing here in WA state 5 months ago... the result?? only 50% of the existing mortgage brokers even made the cut...

But, back to Starbucks real issue... they're trying to make their King sized bed with sheets made for a twin... time for the execs to start expecting the same from themselves that they expect from frontline partners...

just sayin'...

[Darleen]

Why are you so critical about people politely discussing a topic they are interested in, just because we don't get paid millions of dollars to do it?

When I can come on here and read this being POLITELY discussed, as you put it Proud barista then we'll talk. I'm sorry but I'm sick to death of people jumping all over the way Howard is running this company when they have no experience in running a billion dollar company. Everyone's a critic. As far as negativity, that's exactly what I'm bitching about so maybe you should read my post before you jump on it. Just a thought.....

[Borat]

What do you guys think about a takeover bid for Starbucks? I have always thought that Pepsi might make a buyout offer, perhaps 30$ a share that Starbucks shareholders couldn´t possibly refuse. Does anyone have an INTELLIGBLE opinion on this?

Hey, darleen, you seem to think you are the only one entitled to an opinion and if anyone doesn't agree with you, they're wrong. Are you this narrow-minded and control freakish IRL? Just curious.

Yay, Pepsi-Starbucks!

Send Howie back to the Sonics!

[Al C]

Starbucks is Done! This is not because of the weak economy. It is their pompus attitude has come back to haunt them. The "build it and they'll come" strategy was ridiculous than & obviously wrong now. Stores within a stones throw away from each other in urban areas & multiple stores within small suburban towns is simple arrogance. The public has waken and realize that Starbucks was TOTALLY over rated.

[Trader on Confidence]

I'm in at 15.87. This is a bargin price for SBUX. I hope some of you bought and will continue to buy around this level. It's going to get better over the long term. The stock will hit 20.00+ by Q2 fiscal 09. A 25% increase over 9 months is what I like!!!!!! Buy buy buy and leave all the complaining at the door!

[Borat]

Trader On Confidence,
Starbucks showed a decrease in earnings which is extremely negative for a growth company. It is completely unprecedented fr Starbucks which has been growing at an increasing rate. Not only did growth slow down, there was negative growth in profits this time. If this keeps up, they will start losing money. I can´t scrutininze your trade, but their stock will not be trading up until they can start increasing their earnings again, which I don´t think will happen in 2009. Why do you feel that their earnings will increase next quarter if they decreased during this one?

[Al C]

I wouldn't touch SBUX. I feel they had their day in the sun and they abused it. Howard should take his millionssss and look for another venture.

[Melody]

Hey Webmaster, PLEASE consider removing anon's post at Apr 24, 2008 5:22:53 AM.

It's just attacks and insults. When people run out of intelligent arguments, they resort to personal attacks ...

Hey Melody, If my post is taken off then so should darleen's post for the very reasons I posted.

[STARBUCKS GOSSIP WEBMASTER]

Please get back to discussing the company and its current condition, and discontinue personal attacks.

[cupajoe]

Does anyone in corporate have a general feeling of what the aura is down on 1st ave. due to the fact most employees there are going to be compensated with stock options which, at present, are no where near being able to be exercised.

So, if it is the economy, then shouldn't EVERY coffee shop in America be taking a hit? Shouldn't Donkin Donuts be hurting too? In fact D&D are expanding into Arizona by something like 120 stores in the next few years.
I think everyone is blaming the economy becuase they don't want to admit that Starbucks has reached is Zenith a few years ago, and is a brand that is no longer as cool as it use to be. There is nothing worse for a brand then being un-cool!

Posted by: | Apr 24, 2008 9:36:21 AM

I agree.

I went into a McDonalds (I haven't been in years) and was I surprised - actually, they exceed my expectations.

I noticed that they have items similar to Starbucks - obviously espresso, yoguart parfaits, apple snacks, etc. The differences I noticed were, 1) price, McDonalds much more reasonably priced and 2) nutritionals on McDonalds snacks are "better/healthier" options.

In todays economy, Starbucks is a luxury. There are the rich that can afford Starbucks - but last I checked, there are more "not rich" folks in America and I bet they'll be going to McDonalds or DD or other places.

The "experience" is nice and all, but for the majority of people - at the end of the day it's about the money.

[xsbuxdm]

"...cut the DM positions completely making managers accountable to RD's instead. This would mean more individual control over stores by SM's and less influence from "behind-the-desk", non-retail partners who "think" they know what's going on but have had little to no experience running a store." - UMMM RDs are much more likely to be hired from the outside than a DM. And who do you think tells the DMS what to communicate to the SMs?

I posted a message a long time ago that SBUX was following the path of Whole Foods stock...big peak, and quick descent, followed my little to no growth for an extended period of time. I dumped what was left of mine several weeks ago, and wish I had dumped it long before that. It gets in the $10 range, I might consider buying again though.

The environment has changed completely for SBUX:
- it WAS unique 10 years ago, now it is ubiquitous
- it WAS a coffee company, and I believe Howard himself actually called it a media company
- simplicy of product and a limited product line made for great profit margins, now the products are much more complicated and labor intensive. Slows down productivity, eats into bottom line profits, but most importantly, there is no time for partners to focus on customers!!
- The competition has gotten better: SBUX forced the other guys to improve their product.

Bottom line, there are a multitude of issues, the economy is a small part of the big picture, but I have to say, I think the "darling" of Wall Street days are over, with or without Howard @ the helm.

[Barry]

First off, I would like to call on all of the people that were on this board that stated that the 3 hour learning break was a good idea. Likewise, the banning of sandwich sales contributed to this, as did other numerous shenanigans over the last three months. And yet, I remember every day someone posting here supporting this ¨progress¨. You know who you are, can you admit to the fact that you made a mistake? Otherwise, I dont see the point of discussing anything on this chatboard if people aren´t open to admitting that they were wrong once we see the results of the actions discussed.

[SEADAVE]

How much does Dunkin Donuts charge for a cup of drip coffee (free refills?) and a donut? Does Starbucks compete in that price range?

Aside from the cost, I don't think even Pike Place Roast is the drip coffee the typical American Boyds/Farmers Brothers/Folgers coffee drinker is looking for. And Starbucks doesn't present itself as the type of coffee shop where you would find a cup of Boyds/Farmers, etc.

I also think Starbucks and Howard Schultz have a problem with credibility. I don't know if they're trying to compete with McD's and DD's and draw in that group of coffee drinker, or get back to the company's roots and "the bean", or just what. They're replacing one automatic espresso machine with a different automatic espresso machine... does that really matter? They say they want people to linger more and enjoy the experience but then say that they have a problem because they can't serve customer's fast enough and people are bailing out of line.

The company has really sent out mixed messages, appears to be executing poorly with its promotions, seems to ignore the reality of its business (i.e. the Frapuccino's and syrup-laden drinks are big sellers but strike me as being far from the bean and coffee in general).

I don't think the seemingly scatterbrained approach that has been coming out of the company in the last 6 months or so instills confidence in investors. I think it also turns off the customers.

[Cali ASM]

XSBUXDM:
You're right, RD's are just another form of DM's. I think what I was trying to say was that even though RD's "sit behind a desk", they are less likely to interfere with day-to-day store operations than DM's because they would oversee more stores than a DM. In other words, they wouldn't have so much time on their hands that they could "stop by for a friendly visit" to a store and start micro-managing.

I wish Starbucks would fill positions internally especially for oversight of retail operations like DM's and RD's. If no one wants the job, then hire externals. Have externals contributed to our companies current state of being? Maybe, but I agree with other posters that it is many things that are at play here. I don't think we can blame it on just one area.

I know there are good DM's out there and there are good external hires running stores and districts. So to those of you who might fall in to one of these categories, I mean nothing personal. Just some bad experiences that I have had now and in the past.

How do other SM/ASM's feel? Please share. Thanks.

[zipy]

you people have a weird concept of time. I haven't been with sbux for two years but I remember when I first started the stock was at its all time high.

I was in a store yesterday and there was a sign posted by the register: "Attention Customers, this store will now be enforcing Starbucks refill policy...yada yada...one refill consumed on the premises within an hour of purchase for the cost of .55." It was signed by the SM and the DM.

I know that's long been the policy. I just couldn't understand why the DM chose to play up a minor abuse, instead of raising awareness about the refill policy that applies when you buy your coffee with a registered Starbucks card. That's the better message (IMO) and has the upside of growing the business.

There was a time when "Just Say Yes" meant what it said (even if it was abused by a few persnickety customers).

Seeing the news about declining earnings helps explain why Starbucks is moving away from this policy and their long-standing customer service standards. That's the real sadness here.

The DM position is so strange considering that you could get all direction from the portal. I have yet to see a DM that REALLY added to the growth of a store or district. Mostly they are cheerleaders and make sure we lowly SM/ASM/SS/barista people don't get the crazy thought that we have brains that work better than theirs regarding how to run a business. Get rid of them and pay the SM's more while holding them more accountable for results. MEGA $$ is blown on DM's and RD's and they expense everything while we get stuck expected to cover all the driving expenses we incur,etc,etc.

Reducing waste? What a crock.

Some suggestions:

Repair the refrigerator doors so they don't have a weak seal and don't continue leaking cold air. Our huge refrigerator has a door that barely closes. It has been this way for years. Our entire basement has bright lights on round-the-clock, but people rarely go down there. Dim the lights or put in better switches.

Cut paper costs by not having the ubiquitous sleeve. Let customers sleeve their own cup if they choose. And put the sleeves in an inconvenient spot so they have an incentive to do without. Except for coffee/tea, the drinks are not so hot they require a sleeve.

Stop filling the cups to the very top. This makes people pour out an inch of liquid into the garbage bags, which then leak. Also, handle the garbage better by distributing the weight and not emptying empty garbage cans. We often throw out a double garbage bag filled with an inch of garbage. We go through garbage bags like candy.

Get napkin dispensers that dispense one napkin at a time. We have people taking a big pinch of napkins and using only one or two.

Get rid of the complicated drinks, like the frapps that require the addition of chips/powder or teas requiring special shaking. Way too labor-intensive.

Same with the pastry case. Eliminate some of the catering department. Pare pastries down to basic offerings that are easy to handle, don't fall apart into crumbs and fit easily into a standard pastry bag. There is no need for those big cardboard containers for one icky cupcake. There is no need for the cupcake, either.

Come on! Without a DM or RD, how would we know if we "rock" or not (sic)

It's SOOOO easy to be negative about this company right now. I'm actually astonished at how little continuity there is from top to bottom. Think About it: from Howard to barista there are less than 10 levels. Yet, there are so many execs towards the top who I'm convinced are absolutely clueless right now as to what the problem is. And as you know, if something is broken and you can't figure out what, there's NO WAY you can possibly start to fix it. That is why the communication changes from week to week (economy, ourselves, Mcdonalds,etc) as to who we can blame for this downturn. The issue is we have powerful people in place, who are good people, but they have a fundamental lack of understanding for the job that gets done in the store because they've never had to do it themselves. It's sad. I used to be so proud to be a partner.

[DallasSM]

I agree with XSBUXDM, the RDO position is redundant in many cases. However, I believe the DM's are forced to wear too many hats in the organization that take away from their ability to effectively impact sales in the stores in many cases. It seems to me that we should move toward smaller multi-unit management with senior SM's over two to three stores with multiple SM's and ASM's reporting to them at a lower salary than DM and elimninate the RDO position . That way we could have DM's managing 15-30 stores more effectively at a cheaper cost.

I say get rid of shift supervisors in the stores. For every 2 SS's a store currently earns, fold that into 1 asm. What do you think about that? Currently it seems 1 out of every 3-4 shifts in a store are actually there to be professional and work like they want to get noticed, the rest are baristas that want to get paid more and they convinced someone.

[Melody]

What are the 10 levels from barista to Uncle Howard?

Barista, SS, ASM, SM, DM, RM, Sr. Divisional VP, Executive VP, Howard

Is that right? That's my guess - as a customer only.

From what I've read here on this board, there does seem to be a lot of waste in the DM position. Maybe there are just too many of them. If you're truly a manager, you don't have time to micro-manage, if that makes any sense.

And to anon at Apr 24, 2008 1:32:54 PM:

Your post is saddening. It does exemplify, more than anything, a shift in how Starbucks relates to its customers. A couple of customers who try to abuse a refill policy shouldn't be the ones that set the militant tone of a store. Good customer service can be used to cope with them.

Melody,

You are astonishingly close except there is the RVP level in between the RDO's and the divisional VP's, and a hell of a lot lateral bureaucrats in between.

[cupajoe]

How long have the middle management "lateral bureaucrats" positions been building up? Since Nov. 2006 and the decline of the stock from 40?

Frankly, SBUX could have done a lot to mitigate SOME of this, but fact is that it's a combination of SBUX's lack of addressing critical issues it was facing operationally AND how consumer sentiment is.

Yeah, SBUX has done a huge disservice to its investors when it comes to profitability. Giving away free coffee, free music (they had some spending, I'm sure, along with Apple), free pastries (samples), etc...

Companies in the red CANNOT just GIVE free stuff.

Also, they need to further reduce headcounts both inside AND outside the stores. The SSC could easily trim another 100 positions and the stores... well, why are there always five baristas in the stores I visit just standing around? Two, maybe three REALLY well-trained baristas can run any store.

As for the waste... yeah, I've seen it. I cannot imagine how much coffee and pastry is wasted daily. Plus, let's factor in poorly trained baristas "mistake" drinks... It all adds up.

SBUX has a lot to face until it can reclaim a profitable position.

It needs to focus on delivering EXCEPTIONAL customer service to every customer and investor. It needs to teach its baristas that they are there to serve the customer and give the customer perfect service and perfect product every single time. It needs to address what the customer wants and only stock those things.

To be all to everyone is doable and needs to happen.

SBUX needs to focus on the following in this order and address that segment above all others first: Customers/ Investors, Executive Management, SSC, Regional people, district people, store management, baristas.

Take cre of your customers/ investors before your executives... take care of your executives above your SSC... and down the line. Frankly, baristas should be trained well and WANT to move up the ladder and then they will eventually be treated as they deserve. Those who want to sit on the bottom and have no momentum to move up can be replaced like cogs.

Those things will save this company.

[cupajoe]

Thanks for that post. I have never been an employee of Starbucks. I have although, been a frequenter to the stores approximately 25 times a month as well as been a shareholder for about 14 years and have been buying shares all along. I have some stock at a split adjusted $1.50. Unfortunately for me, I have never sold any. I have lost hundreds of thousands of dollars!! And............I still believe in this company and this stock, heaven help me.

[SEADAVE]

Companies in the red CANNOT just GIVE free stuff

In the red? Are you suggesting that Starbucks is losing money?

[Darleen]

Hey Webmaster, PLEASE consider removing anon's post at Apr 24, 2008 5:22:53 AM.

It's just attacks and insults. When people run out of intelligent arguments, they resort to personal attacks ...

Thank you Melody. I appreciate what a sweet person you are. As far as anon biting back at me even though I was not addressing him, it's par for the course. Anytime I disagree with someone I'm told I think my opinion is the only one. Everyone has an opinion, and I am stating mine. I'm of the opinion that unless you have knowledge of how a billion dollar company is run, you should stick to what you know and leave the people actually running the business to do just that. Yes, we're in a slump, yes the economy is in a recession, regardless of if anyone believes that or not. However, we will see this through and come out okay. I would never think to give this company, or Howard for that matter, advice on how to run this business. I run my store, I let the execs. run the company. I'm sure I'll get an earfull of how it is not being run well...... for what it's worth and honestly, I do not think I am any better than anyone on this website. I know I can come off a bit passionate, but I love this company and I choose to defend it and am proud of what Howard has accomplished. If I tend to get heated about things, it is because I care and get defensive. I'm human, and yes, with flaws and all.

SBUX at yesrly low 15.99. Can't wait till it goes below 10! PEPSI, PEPSI, PEPSI!

[smokey]

darleen-I TOO LOVE STARBUCKS! as a long time partner, i have disagreed with several products brought forward and with different marketing strategies throughtout the years. but, with howie back at the helm, i'm sure he will let go of past failures, will close those doors and will step forward into the future!!where this company is going is more significant than where we have been. noone can doubt howie's passion for creating the THIRD PLACE. come on all you PARTNERS, you might feel knocked down with all this bad press, but let's not stay down. let's pick ourselves up and help turn this company around!! sorry to disappoint all you negative "posters" but there truly are partners who do believe!!! i say onward howie!!!!

Companies in the red CANNOT just GIVE free stuff

In the red? Are you suggesting that Starbucks is losing money?

Posted by: SEADAVE | Apr 24, 2008 4:49:49 PM

Yes. Starbucks has guided the year to be slow. They lost money last quarter. While maybe on a "whole-picture" basis SBUX is fine, they are guiding lower and expect losses. So, yes, they are in the red, at least on a quarterly basis.

[Proud Barista]

I've always been amazed that Starbucks even turns a profit, so maybe reality is catching up with them. At my store we are lucky to break $2,000 in a day. How do you run such a huge business on pocket-change like that? I think Starbucks' biggest mistake was growing too big for their britches.

(And yes, as a barista, I'd love to see Sbux make a comeback, but I'm also a realist.)

[SEADAVE]

They lost money last quarter. While maybe on a "whole-picture" basis SBUX is fine, they are guiding lower and expect losses.

Which quarter are you talking about? This "last quarter" was FY08 Q2 and this what I read:

The world's largest coffee retailer said it expects second-quarter earnings of 15 cents per share on a 12 percent revenue increase, down from earnings of 19 cents per share a year earlier. Analysts polled by Thomson Financial were predicting a profit of 21 cents per share for the quarter ended March 30.

That doesn't sound like losing money to me.

no more DMs! better pay for baristas! Cut the SS position unless you're willing to pay them for what they do- bitchwork! Make a keyholder position, hire one or two ASMs per store as necessary, and let the store mangagers run their own stores and only answer to the regional district manager.
Think small, keep it simple. Look at the little coffeehouses we are based on. That's where individual store success will come from and add up to a big picture success.

[Joe]

Melody,

I really wouldn't gauge the importance of the DM position by the whiny sentiments expressed on this board. A Starbucks DM generally is responsible for 7-10 stores which is typical for a chain this size. In fact the RDO position is also well situated at around 70 stores. Where Starbucks could lose at least one layer of management is above the RDO level.

whoa, whoa, whoa people...what we need to do is stick to a plan. An org structure. And not implement anything until we get really, really good at what we need to do right now (remember the customer?). I'm seeing the flip side to a company that is so receptive to process improvement. This place changes from week to week so dramatically, that by the time we implement the changes they are already outdated and require us to go back to the drawing board. We are spinning wheels "making changes".

Don't get me wrong- I agree with the transformation and am completely onboard. But I see a lot of folks attempting to implement their own "changes" along with what they believe our transformation stands for.

DMs are critical, but we could ask that they manage the business from a smarter position (and they'd probably enjoy it). But they were responding to feedback from a few years ago that DMs are never in the store. SO we put them in the store, and now stores feel they're micromanaged.

We can't keep thinking we can please all of the people, all of the time.

[Michael W.]

I think if the price of Starbucks keeps on falling... Shultz will sell the company to Pepsi. "Starbucks, a subsidiary of Pepsi Cola". If you noticed, Pepsi has never really entered into the coffee business, because of their close relationship. Take a look at the board of directors on Starbucks... Pepsi executives... and take a look at the Pepsi products that the stores are selling...

Coca-Cola is trying to get into the coffee business... so, if Starbucks it makes sense for Pepsi to "diversify" it's assets... and have a global exposure through Starbucks.

That way, all investors will be happy... if the take over price is at a significant premium...

Who would have thought that Wendy's and Arby's would be one-together 5 years ago? Anything is possible

[Praxisguy]

The earnings reduction is an acknowledgement of the impact of the economic elephant in the room, the recession that only Horton has been saying is here.

If we'd had a little more courage, we'd have released news of this reduction at the shareholder's meeting. We knew it was going to happen then.

Instead we hoped that cutting a few jobs--a smoke and mirrors trick--coupled with the Clover purchase--shiny new smoke--would convince shareholders to buy into an aggressive spending spree that we'd already determined to do (the Clovers aren't the spree).

Either we were afraid to tell the truth, or too arrogant to think we needed to. After all, it made sense to us. Why wouldn't it make sense to our customers and shareholders?

We can get back to basics and we can relentlessly innovate. The question Howard had to decide, is whether to do one and then the other or to attempt both at the same time.

Two things happen when you burn a candle at both ends.
- you get mono
- you lose whatever you gained because you're too tired

There's still time to change course.

It's sad.

[IMASBUXHUBBY]

Over saturation is an issue.
Here in my "smaller city" with a population of 220,000 city wide we currently have 20 stores with 3 on the way set to open in a 4-6 week time.
Here is an example of how close some of the stores are to each other.
Starting at store 1
2.3 miles to store 2
1.85 miles to store 3
3 miles to store 4
1.6 miles to store 5

So within 9 miles there are 5 stores with 4 out of 5 drive thru.

Interesting huh.......
comments?

[StLouieDrip]

Cup o jo:
Stocks tumbling=Pike Place

It's probably not the only reason, but it's the EXACT reason that popped into my mind. I know I've made fewer visits to sbux specifically because of PPR, and I know many others have felt the same way. But I don't really blame the PPR; I blame the fact that it's the only coffee available in the afternoon. It also didn't help that PPR was touted as "getting back to the roots" when it doesn't resemble the traditional sbux coffee to which we've become accustomed. Like SEADAVE mentioned, there's a lot of mixed messages being spouted (including those regarding PPR), and I agree that makes the company (and those who run it) seem less trustworthy and less credible.

Von B:
Pike place (ie everyman's coffee) is going to be our anchor during the rough seas ahead.

Many of us feel that making PPR the anchor is exactly the problem. Depending on an "everyman's coffee" to shore up and save a SPECIALTY coffee company is exactly the wrong strategy IMO. And it causes me to have less faith in those who make these types of decisions.

It also doesn't help how often the comment is added "Starbucks has a long-term goal of 40,000 stores worldwide." And with that I feel like, "why does it matter to me what stores you open in other countries when I can't even get the coffee I want at the sbux right around the corner? And why should we trust you to open and profitably manage 24,000 more stores around the world when you can't properly operate the 16,000 that you already have? And who's going to finance all those 24,000 stores anyway? Fix what you already have, then discuss expansion.

[Proud Barista]

I agree Pike Place was a bad move for the company. Howard claims we are "getting back to the bean", but what does it mean when a COFFEE SHOP is only brewing ONE KIND of coffee?! Isn't that Starbucks' pride, is that we have so many great coffees sourced from all over the world? But now we've limited ourself to one rather indistinct blend. I say get rid of all the frou-frou drink crap and lame merchandise, install 2 more brewers, and every day have a Latin, African, Asian/Pacific, and Decaf for customers to choose from, on tap, all day long, every day.

I don't know how many stores will get Clovers, but I would be so excited if we could get one, and let customers pick from a whole list of coffees.

We are a coffee shop... where's the coffee??

[Cali ASM]

IMASBUXHUBBY:
I'm in total agreeance with you. Oversaturation has killed us. I'm in a smaller market and there are 4 stores in my city with three in the next town only 5 minutes away! Things were great when there were only 2 stores in my town. We were busy all day, we had great labor, etc, etc. I miss those days.

I think Sbux needs to close way more than 100 stores. Why not 1000? 5000? And what's with a 40,000 goal? It's way too many!

Let's stop opening new stores and focus on improving things in existing stores. Aren't we supposed to be getting back-to-basics?

[B-rista]

Cali Asm makes a good point. Our store is getting run-down looking.. it's be nice to have it upgraded a bit! However, it's not in the currents plans..but a brand-new store will be opening 10 minutes away. Wonder how much that one will drain business from us?

PPR = so what

now you can make a blah cup of coffee just like mcd and DD.

lowest common denominator?

When I first started working for Starbucks, the stock was trading at over $60 a share...*tear*

I agree, Starbucks in the long, long run will be gobbled up by Pepsi. This will be excellent for SBUX shareholders.

Anyhow, stocks go up and down. Previously, who would have imagined McD's stock, during the time when the movie "Super Size Me" came out, it was doom and gloom for McD's. Their shares were trading at $13 or so. And today, $50+ bucks!!!!

The same applies to Starbucks, eventually, once things "change", things should start to be shaping up for Starbucks.

Get OBAMA to run Starbucks! "CHANGE" IS GOOD!

not Pepsi it with be Phillip Morris = Kraft on a hostile buyout.
Howard will not sell it, it must be taken from him.

DM's are gone as well as ASMs, RD + SM + SS only, need to flatten the company more as Howard continues to say.

[Cali ASM]

B-rista:
Just wait. It'll happen. One week, it will be business as usual, then after a while of that new store being around, it'll feel dead.

Anon on 4/26@1:15:43
"DM's are gone as well as ASMs, RD + SM + SS only, need to flatten the company more as Howard continues to say."

What did you mean exactly? Get rid of DM's and ASM's but keep the others? (Definately the DM's, ASM's? I don't know about yet.)

[john smith]

How are the RD,DM leading the store teams through this challenging time for starbucks? Who are the best and who are the worst?why?

[dmanagerLA]

Honestly, some dm's are fantastic and encouraging. my new dm prefers to listen to himself speak, take credit for others ideas, and basically demoralize the team with threats of corrective actions. honestly, in all my time with starbucks, i don't think i have ever met a more annoying person.

our rd, well, lets just say she is a bit dramatic.
if we have a line, she is panicking. Let's see...we get busy, sometimes earlier then planned, and then we have a line.

Our RVP, I think that is his title, I forget, is FABULOUS!!! He is newer to our area, and I cannot wait to see the impact he has on RD's and DM's. Roly Morris is his name, and his spirit is uplifting and his advice is practical and realistic. I think he appreciates the entrupenurial managers, unlike the RD and DM.

However, if things, morale wise, don't change in the next few months, I will (sadly) be leaving Starbucks. My high blood pressure just can't take the drama! lol!

I think Howard being back, at the store level anyway, is very inspiring. His store visits have certainly created an excitement and Buzz, which is what our retail partners NEED.
Whether or not he is in "charge" to me is irrelevant. It is his presence we need to inspire us back to greatness.

[dmanagerLA]

and john, sorry, but i just can't name names in regards to who the "worst" are.

[Al C]

I spent 2+ disappointing years as a store mgr w/ SBUX.
1) They claim that they are environmentally aware. Total BS- They leave recycling totally up to the store mgr (as long as there is no cost)
2) Told the entire company that we were going to Costa Rica (only to CANCEL) Claimining to give back in salary increases. Total BS.
3) Switched to 2% milk, claiming it was more healthier for their customers. When the reality is it is CHEAPER for SBUX.
4) They sell false promises for promotions and advancement opportunities. Total BS!
SBUX- is nothing more than Spin Doctors who try to sell themselves as a World Class Organizaton- Total BS.

[BEANBURNER]

I recently completed interviews and testing to become an employee at the new roasting plant in South Carolina. We are supposed to be sent to the plant in Nevada at the end of this month for training. Our overseer here says we will be in a motel near Minden and will split a rental car 4 ways.Has anyone here been through the plant training in Nevada. The place looks kinda desolate and I'm thinking a 4 way split on transport might leave me stranded. Should I take a compass,GPS, and dried food just in case. Nights in the high plains desert can get kinda cold I'm told.

[Pat Nerr]

Beanburner... enjoy yourself. The Carson Valley RP people are top notch and while there isn't much to do in Minden, NV, they'll most-likely entertain you like you've never been entertained before. You'll be fine to carpool. The place is gorgeous and nestled right next to the mountains.

Your hotel (Carson Valley Inn I assume), albeit smokey, has gambling. Shoot me an e-mail, I can give you more details and connect you with some folks.

[Donnieboy]

Every company experiences a life cycle, in the olden days... Warren Buffet usually sees a company through some slow periods, and many privatley held companies see things slow down, the only difference with our public companies today is aour shareholders (consumers) are too greedy and want everything now. Starbuck is growing too fast and it doesn't need the number of operating stores as it wants, I know the Starbucks in my neighbourhood slowed down when they opened 3 more in nearby locations. Although I did like the idea of demographically sending specialized beans, kudos for that idea, I think they need to let go of a few stores but a big drop in stock prices... as long as the shareholders don't beat the crap out of them I expect them to be around a long long time...

[nino]

hey-pikes place is NOT the only coffee. for about $4 and 7 min of your time, you can have ANY coffee in the store fresh ground and made in an 8 cup french coffee press for you to enjoy.not a bad deal.