What Starbucks told employees about Wednesday's earnings report

With the second quarter earnings announcement behind us, we wanted to take a few moments to reiterate some of the key themes from the call and give context to the early reaction from media and analysts. 

 

As we discussed today, we are very encouraged by some positive trends in our second-quarter performance. While some of the initial press headlines are focused on an excessive profit decline, they are not taking into account the one-time restructuring charges we are taking for store closures and associated expenses. In short, we beat the consensus analyst estimates this quarter and we’re making progress on our cost-savings initiatives and the overall U.S. business. Our progress today is in large measure due to the tough decisions and sacrifices we have made across the business during this past year of restructuring. The company has come a long way and we have much more to do, but we should all feel good about today’s results.  

 

A few key themes emerged from the earnings call today. Let us share a few of these with you: 

 

We are Healthy

With a strong balance sheet and cash flow, continued cost savings, Starbucks is in strong financial shape and is well positioned for the future. Most important, we continue to be profitable – a claim many companies cannot make these days.

 

We are Encouraged

While the global economic crisis continues, we are seeing early signs of improvement in our business. Traffic declines have leveled off, consumer confidence seems to be rising, and new initiatives like Starbucks VIA Ready Brew are showing promise in our initial, limited roll-out.

 

We are Ready to Tell our Story

With the upcoming launch of our new marketing campaign, and with your help, we’re ready to tell our story.

 

Over the next few days there will be more commentary about our business performance and our upcoming marketing campaign.  Thanks again for all your contributions to the company and we will update you periodically with financial and media updates.  

 

Best Regards,

 

Troy Alstead

evp, CFO

 

Vivek Varma

svp, Public Affairs

Comments

[pApI]

Yes the change we need!!!

[Coffee Soldier]

Maybe they could hand out some of those bonuses to our shift supervisors and baristas they used to give out a few years ago to thank them for jobs well done at the store level down in the trenches where no one else bothers to go before making major decisions that effect them on a daily basis.

[pApI]

Kool-Aid delivering thousands of smiles per gallon...

[coffee drinker west]

I hope all the labor they've taken will be returned so we can deliver legendary service again.

[NYSM]

That's the corporate way of saying, "We'll do better, once we get out of a recession."
If they want to cut costs, get rid of the DM's.

Start with NYMetro

[SBUX Alum Bill]

Well, if they can sell this stuff, they shouldn't have any trouble selling anything in the summer line!

[Pat Nerr]

whew... I was beginning to think they were going to grasp at straws... switching the focus to "it could be worse" and "things are appearing to level out" puts my mind at ease and gives me comfort...

jac... apparently, I'll get my wish #1

[ARE YOU SERIOUS!!!]

Oh, now they're being honest with us all. Maybe we can count on the guiding principles coming back into focus too.

LOL :D!!!!

I'm laughing so hard I think I wet myself.

[beantheredonethat]

At least they had the PR flack sign his name to the executive memo. Usually, they work behind the scene.

[hmm]

@ NYSM

I agree with your idea for NYMetro. I left 100% because of my DM to a much better place (job) only two months ago. I don't know where in NY you are, but I feel your pain.

[Bouncing Barista]

they don't need to cut costs...thats why they arent giving out raises to any ASMs or above this year...

Anyone out there get their "results assessment check in" convo yet with their boss?

Basically...nobody is meeting expectations! yay!! :(

So bonuses...yeah right. And raises, what are those...

[GRTL]

Get rid of the DMs....GET RID OF THEM! Useless!!!!!!!!

[Melody]

[quote=coffee drinker west ]I hope all the labor they've taken will be returned so we can deliver legendary service again.[/quote]

I don't think so. I used to repeatedly post and think that, as the economy improved, labor would correct itself back to allow some more wiggle room for coffee tasting, sampling, and coffee eduation. I was wrong. At yesterday's conference call, Troy Alstead (I think it was him, though I could be wrong) definitely talked about the $500,000 in cost savings as "permanent" changes. Though only 1/4 of those cost savings come from in the store changes, and I'd definitely bet that labor is the overwhelming majority of that 1/4.

[JustinTrouble]

Melody,

I wonder how many other customers thought that the labor cuts would be temporary. I also wonder how many customers are going to get sick of waiting while the remaining baristas run around going crazy trying to get their food and drink. I think customers are going get tired of it little by little and either find other coffee shops or just give up going to coffee shops as often.

[STARBUCKS GOSSIP WEBMASTER]

FLIGHTMEDIC -- Put your post in the OPEN THREAD. The rule here is you stick to the topic. Also, you've already posted your message in one area. Don't spam. And don't make me have to ban you.

[FLIGHTMEDIC]

I understand now: I don't know how to do and open thread.
can you help me.
I would like to get my message out.
thanks for letting me know up front.

[STARBUCKS GOSSIP webmaster]

Post the comment to one of the OPEN THREADS on this page. Open threads are posted every Friday. Scroll down for last Friday's thread, or wait until tomorrow.

[Anonymous]

I have been a Starbucks customer since 1993, but over the past couple of years I have really cut back on going; not because of $$, but because the stores just don't seem clean anymore. I am tired of seeing sick, sniffling baristas making my coffee; and my drinks have literally been coughed on twice! I have also caught two nasty viruses recently that I directly attribute to sick baristas. If you're sick ... please stay away from my drink. This would not have happened 10 years ago!!

[brown dot]

Anonymous,
it would be nice if we could stay home but if we did you would be complaining that you had to wait an even longer time than normal because we are a person short and do not have anyone to call in because we got rid of most of our part timers. Also, baristas do not get sick time, so they can't afford to stay home sick and they aren't allowed to use their vacation time unless it's a real vacation. That is the world we live in now...sorry it's not the same as it was 15 years ago!

[SS Stevie]

Anonymous:

I totally hear you, and you are right. If you’re sick in the food service business you should stay home. Starbucks management approves of this policy in theory, but if you call in sick, even with enough notice, there will often be retaliatory action. The company denies this (they lie about many things). The retaliatory action comes in the form of “managing out” a partner. This means that a partner is criticized for everything and made as miserable as possible until they quit. If possible management writes a partner up with corrective action forms until they can legally fire you without unemployment benefits. It’s all totally legal and ethically corrupt. But that is why you have barista come to work sick.

Starbucks also used to offer two personal days per year to hourly partners, but that benefit was revoked in the last year. It also used to be much easier for a partner to get his/her shift covered. But with all the “optimal scheduling” and layoffs it is very difficult in some districts to do this. This is also the reason stores are less clean. With less labor it is harder to keep up with the deep cleaning. But aren’t we all glad the company is maximizing profits?

In general, it has become harder and harder to be a responsible partner at Starbucks, because the company has become so deceitful. The corporation doesn’t care if customers catch something as long as they have your money and can’t be held responsible for it. You may want to buy Starbucks stock but I don’t know if you want to eat there.

[BOSTON STARBUCKS REBEL]

I almost pissed my pants reading that statement. Troy "Humbug" Alstead is so full of crap that. I think all we can do now is survive as a company. We can no longer thrive, just survive from day to day.

[pApI]

@ BSR

Did you get to play in the bathrooms today??

[coffee drinker west]

so say we all SS Stevie

I bet some troll will write about how lucky you are to have a job and blah blah blah

[Another Customer]

I’ve heard a lot of squabbling on this site. Good points on both sides; those who believe that management is doing the best job they could and those who feel taken advantage of by management. I wonder though if anyone will be happy with the apparent direction the company is headed. It seems that Starbucks is attempting to leave the coffee shop business. More franchise and products that don’t need a corporately owned coffee shop to be purchased will be their new focus. Starbucks has apparently thrown in the towel and decided that it is more profitable to do away with stores. That’s what I got from the earnings release.

[NYSM]

Hmmm...

Long Island
The RDO is like wallpaper, he has no clue. And one of the DM's is banging her head underneath RVP's desk..

[Southern Barista]

In other words:
Our progress today is in large measure due to the tough decisions (that no one really thought through very well) and sacrifices (thousands of partners) we have made across the business (except for the priviliged few) during this past year of restructuring (firing anyone who knows what they're doing but makes too much so we can hire a bunch of folks who will eagerly drink our kool-aid for several dollars less.)

[jac]

Pat,
I agree with you about the good Dr. (empty suit) but he's irrelevant and not what I consider senior leadership. JAK and GN - also irrelevant. One will be gone in the fall. Maybe you should move on and get over the bitterness.

Starbucks has turned the corner and the analysts realize it. People were jumping up and down about the stock as it dropped over the past 18 months. Absent from this site is much if any discussion about how well the stock has performed since hitting the 8s. Got to give credit where credit is due.

[Pat Nerr]

There's no bitterness "jac"... just a commitment. Starbucks will not return to where it once was. That fate was sealed the day they decided to dumb down the special experience they once created by using push-buttons to handcraft.

Now that Starbucks has written all of the checks in their employee engagement check book and driven down their Best PLace to Work score, they're going to have years of rebuilding ahead of them with employees and their commitment. The've ruined the trust... good luck with that.

Glad you're enjoying your work

[One Who's Been There]

After 5 years as barista and 5 more at the support center in Seattle, I have seen the view from both sides. I only hope that whomever corporate assigned to keep up with the buzz on this blog (you can bet they do) takes what they read here these days seriously.

As for the "stay home when you're sick" policy: I can't imagine how hard it is now to get a shift covered when a partner is sick. I wondered how Starbucks was going to handle this when the Swine Flu became serious enough for TV to air public service messages about staying home when you're sick. As for the rules, when a partner is sick and doesn't get their shift covered, it is the manager's duty to prepare a written warning. After several the partner can be put on corrective action and eventually fired. Most SM's use good judgment to determine if the partner is a chronic abuser (calling in sick) before writing up a partner. If the SM goes by the book and follows policy all the time, it definitely deters partners from calling in sick -- thus, all the coughing and sneezing. Imagine what would happen if customers called the local health department and filed a report every time they witnessed a sick partner serving food and beverages at Starbucks? That's the type of active customer involvement that could truly change the working policy (which is different from the written policy).

Before my lay-off in February, I remember vividly the corporate view was that starbucksgossip.com is just a place for the angry and disgruntled to vent. The posters here were judged as clueless people who need to get a life. Hopefully since the lay offs and the tanking of corporate ship/stock price, that very biased view has been reversed, or at least tempered. Here is the only place where people/partners can be open and honest. I believe this is because Howard is viewed as such a powerful man. He's so idolized by his inner circle that his closest confidants won't dare offer up even the smallest dose of brutal honesty, as in "What the hell are you thinking, Howard?" This is a stretch, but it's sort of like the Elvis or Michael Jackson syndrome -- famous people get away with a lot because no one close to them wants to risk losing their seat in the royal court. Thus, the emperor has no clothes.

For an interesting read titled
"Trouble Brewing" by Martin O'Neill, visit
http://www.newstatesman.com/books/2008/02/starbucks-coffee-clark
Here, I learned there's a Starbucks at the Guantanamo Bay naval base, and chuckled at Howard Schultz being referred to as one "hyperactive megalomaniac, given to flights of rhetorical fancy bordering on pure nonsense."

Well put, NYSM --> "In other words:
Our progress today is in large measure due to the tough decisions (that no one really thought through very well) and sacrifices (thousands of partners) we have made across the business (except for the privileged few) during this past year of restructuring (firing anyone who knows what they're doing but makes too much so we can hire a bunch of folks who will eagerly drink our kool-aid for several dollars less.)

This hits the nail on the head.

[Melody]

[quote]Before my lay-off in February, I remember vividly the corporate view was that starbucksgossip.com is just a place for the angry and disgruntled to vent. The posters here were judged as clueless people who need to get a life. [/quote]
Lord, I hope you're wrong. There are a lot of real gems of wisdom buried even in some of the angry rantings. Even many diamonds in the rough buried in the pages here.