Magazine asks: Is a turnaround brewing for Starbucks?

BusinessWeek magazine goes to analyst John Langston for an answer: "What they've done so far is really just trim the fat," he says. "That's what needed to happen," but now the company must actually grow sales. Management expert John Macaluso worries Starbucks could be cutting costs too deeply, and ultimately could hurt the quality of products or the cleanliness of stores. "They have to be really careful how they cut." || Read "Is a Turnaround Brewing for Starbucks?"

Comments

[Former Los Angeles Partner]

John Macaluso is right when he is saying that Starbucks could be cutting costs way too much. I understand critical business decisions need to take place in order for this company to stay healthy and profitable but at the same time as many of the comments here say that in order to make business you must also invest in your business, all of course with the right investing. Labor is one of the main areas of the cost-cutting plan and many customers that I see at my new job have been telling me that they no longer like visiting my former store because the lines keep getting worse with only as little as three partners working the floor. It makes me sad because many of them used to be my regulars and would always keep coming back for their daily Starbucks run, now they just grew tired of waiting from what they've told me so far. I truly wish that stocks go sky high and there is a big business turn-around, although it won't happen anytime soon but all in due time. I bid you good luck, Starbucks. :-)

[javajohn]

This is what summed up the article for me: "Lately, Macaluso detects more willingness on consumers' part to spend on "affordable indulgences." That doesn't mean the economy has improved exactly, but, he says, "people are getting tired of depriving themselves.""

I think he's right. Starbucks has always seen itself as a company that offered affordable 'luxuries' like a good cup of coffee or related coffee drink. When the economy went into tailspin, people decided that even 'affordable' luxuries were no longer affordable. Now that we're seeing a bit more brightness on the economic horizon, the business is beginning to come back. Two years from now it will be 'what was that all about'?

[Jack Smash]

Last point was great - wall street got a little excited! I was on the portal when I first saw the spike (+2.74), it threw me off balance until I read the Q3 call transcript. I have about 1100 shares , so increasing my stock value $3014 in one day was a nice surprise. I would imagine if things continue in this path, a split could be a nice reward for all the shareholders who have stuck around.

[CamSpi]

But did they strain some muscles by exhausting partners and depressing morale by taking away so much labor?

[brown dot]

I think that Starbucks is done cutting. Now they will start more of an investment. I think we just need a strong end to FY09 and a strong start in FY10 and we'll see them begin to invest in the stores and partners again, like maybe adding a wee bit more labor. We just had to make it through this rough patch. Now if only they would stop investing in so much stupid retail..no more mugs and tumblers PLEASE!

[The Bride of Il Giornale]

Do you know how I can tell that Starbucks is making a turn around?
This topic has been up for almost 12 hours now and 6 people have commented. If there had been a bad 3Q report there would be 100 posts or more from people who think they have all the answers.

Where are all you crankypants employees now? When good things start to happen where are you? I guess the opposite is true at StarbucksGossip... if you don't have anything bad to say, don't say anything at all.

Thank you to all the partners who give their best every day regardless of their perceived situation, and thank you to all the posters who take the time to counter all the negativity here usually.

[blarg]

"
Where are all you crankypants employees now? "

We quit. And we're happier at our new jobs.

Seriously I feel like an elephant has been lifted off of my chest.

[mickey]

blarg... and yet, you're here today.
whatever... wish you the best in your new endeavor. your new employer has the advantage of what green apron qualities you managed to absorb and take with you.

Thanks for checking on us... we'll be fine.

[prime mover]

trimming the fat = firing senior managers and replacing them with new, lower paid sheep that don't 'remember' what the 'good times' were.