Here's a stock picker who still has faith in Starbucks

The stock is definitely beat up -- there's no arguing that, acknowledges Tim Brown. But he hasn't given up on the company because...
* Shutting 600 stores in the U.S. should help keep some costs down while filling the stores that remain open, he says.
* "The company is looking to take advantage of its brand recognition overseas, which makes a lot of sense to me."
* "Starbucks has great brand recognition and customer loyalty here in the U.S., so I don't see its competitors encroaching substantially on the Starbucks' clientele." (Read TheStreet.com story)

Comments

[snagger]

This guy is more into football than stocks; maybe what he's really saying is that SBUX deserves the boot.Sell SBUX and buy MSFT, ORCL or CSCO!

[coffee please]

STREET.COM? WHY BOTHER POSTING SUCH RUBBISH?
If you don't have anything interesting to post, go quiet. Christ, it's like Howard -- "What am I going to do now?" He adds a milkshake, you opt to post Street.com.

[trixi g]

Are you guys are forgetting the most important practice in aquiring stocks? BUY LOW..SELL HIGH.

Unless the stock is Starbucks where you sell high and buy low.

[Gust]

Well, from what I've seen of these overseas operations, I can tell you that some of them quite depart from a typical sustainable growth scenario.

Sure, in selected markets Sbux is establishing permanent presence. Think of the UK, Germany, Switzerland and probably also France.

But in some other markets they rather limit to a couple of licensed stores at A+ locations (typically international airports). These stores likely do have minimal investment or startup costs for Sbux, whereas they probably generate a sound revenue stream from the first day as a result of brand recognition in an international setting. I can imagine that given the current economic conditions, the company is welcoming this source of fast cash. But quality at these stores is substandard. Not too surprising given the applied approach. It is my guess that when overall company figures improve, they will simply pull the plug on these stores. It's more like a hit the money and run operation.

[JMW]

To the commenter on "buy low, sell high" -- suggest you read some Benjamin Graham (Buffett's mentor). It's a great "philosophy" as long as you're omniscient and know what "low" and "high" are in the universal scheme of things.

As for me I prefer to buy into well-managed companies with solid, reputable brands. Does that sound like Starbucks today?

Re: overseas operations. I keep hearing this saw about how their international sales are growing well. Of course if you look at the 10q, the international business is only around 20% of revenues and the obvious question is whether they can scale. Taking into account, as ought to be common sense, that international expansion is inherently riskier than domestic.

More importantly: if the Starbucks strategy isn't working here, why (in the the long run) will it work overseas? Other major competitors can expand, and energy/food prices are in fact going up worldwide. Wishful thinking doesn't make for great long-term prospects, even in a global company.

[Jim C]

SBUX Australia is practically closing shop
SBUX France is doing poorly
SBUX Germany sales #'s are down
SBUX Japan is just coming back from a long downturn
SBUX China is strong, but it remains to be seen if it can sustain sales, and it only has 45 stores.

Most of Europe is in LOVE with Nespresso, and thiks that SBUX is for tourists and "milk lovers", not coffee lovers.

Because SBUX is a labor-driven business in ANY country, they do not benefit from a low US dollar like US manufacturers do when exporting products. SBUX does not export much product - SBUX is a net importer of beans. So, enough with the financial articles from the street, or the "we are partially owned by Howard's VC company, so we write nice things about SBUX" Motley Fool, and their fascination that International SBUX will save the day. When the numbers are scrutinized, International markets suffer from the same US problems.

Martin Coles is not the answer- he will be the next $600,000 sacrifice next quarter to make up for 'a failing economy'.

[Counter Bean]

Bucks is going down. First it was closure of 100 stores, then it was 600. Expect anothe annoucement. If you're good, you will get another job, but I'd start looking to GET OUT NOW so you can have your pick of the best jobs that your fellow employees will all be chasing at the same time.

International sales are NEVER going to scale up to save BUX--its investors demand the same rapid growth that fatally wounded BUX in he first place. That will never succeed overseas. Even people here ridicule a Starbucks opening on the ame block as an existing one. In a place like France, you don't need more than one for miles. Consumer habits and impatience are just not the same there as they are here.

FOr a funny riff on Starbucks across the street from each other, see Lewis Black's take on the end of the universe (it is in Houston, where a Starbucks opened up directly across the street from another one)

[david nonan]

I just tried to get a $2.00 frozen drink after 2.00 pm. you have to follow a few rules 1. Buy a drink in the morning( thereby spending more money than you normally would. 2. keep the receipt. 3. Then order after 2.00 pm. i ay go to hell STARBUCKS> California hopes you all go out od business

[LookingOverMyShoulder]

As a partner who contributed to SIP for years, I've watched the value of my shares fall off the map. Every time the stock slipped a few dollars I said, "it'll recover and when it does I'll sell", then slip, slip,slip. Now it bobs around 13-15 a share and I'm desperately hoping it gets up to $20 so I can cash out, take a year off and go back to school. My ex-DM ( he was fired last week ) used to tell me that the stock was overvalued and I wish I would have listened.

I am also a sports fan, and I'm wondering if part of Howard's plan is to cut the payroll and then sell the company ( this is called a 'fire sale' in baseball and is common when an owner wants to sell a team ). Anyone think this could happen? If Pepsi bought the company ( not likely, but I've imagined it ), do you think it would help the stock?