Starbucks 3Q profit beats Wall Street estimates, despite drops in sales and traffic

All that cost-cutting helped. Starbucks earned $151.5 million in the third quarter, compared with a loss of $6.7 million a year earlier. Same-store sales dropped 6% in the U.S. and 5% worldwide. The number of transactions fell 4% and their average value slipped 2%. On the positive side, sales improved each month during the quarter. || Read "Starbucks' third-quarter profit beats estimates." || Starbucks' release

> Wall Street Journal: Starbucks exceeded its cost-cutting projections for the quarter, saving $175 million in costs, above the $150 million it had targeted.

Comments

[Rasta-Barista]

It's about time, now lets see if we can keep this up, Ya-Man!!

[Mikey]

I had a feeling Starbucks Corporate Head Office had a feel good attitude by stating last week it was FREE PASTRY DAY that coincides with today's excellent earnings report. They knew that they were going to beat the estimates and decided to pass that feel good feeling to all of it's customers.

[Mikey]

And... the stock is up almost 10% in after hours trading.

[Bearded Barista]

It's nice to hear some good news for a change.

[BusyBean]

The statement on the SBUX investor website that customer speed of service is up is a blatent lie.

[me myself and I]

Average ticket slipped? How about not downselling into pairings? That might help!

[Just a Shift]

Great... glad to know that laying off my ASM wife is paying off. Have fun with your profits, kids.

[Durg]

"Just a shift" - Your wife was a lazy, she had to go..

[SBUX Alum Bill]

I agree with the analyst who stated that the cost cuts are the easy part. Sustaining your market share after making those cuts is the hard part. The consequences of short-term cuts usually aren't felt until subsequent periods. We won't really know if Starbucks was successful in the long run until they can prove that the short-term labor savings in Q3 haven't come at the expense of the long-term customer loyalty that they once enjoyed.

[HardOpinion]

I agree with SBUX Alum Bill. Short term cost cutting is the standard account/CFO stunt to improve the bottom line, but it usually leads to long term issues that cost more to fix than the initial savings made. The thing to remember is that Sbux is a Corporation with many sales channels - the stores are just one channel. If they under-perform, they will go! Despite the rhetoric of "we want to get back to our core concept" it's all about profits (wherever they come from), pleasing the stockholders and the market analysts.
The people responsible for making it happen at the sharp end (store staff) are just cannon fodder - do it, stop bitching about it or go! There is your "respect & dignity"!
As for the pastry "give away" - have you looked at the nutritional values of some of the new products - healthy they are not - the only thing that will be healthy will be the profits if these things sell. Check out the post on www.HardOpinion.com.

[Melody]

http://www.mpdailyfix.com/2009/07/starbucks_profit_aided_by_cost.html

^ Interesting one marketing blogger thinks that numbers are improving due to effective Starbucks marketing.

But I have to agree with SbuxAlumBill at least in the sense that only time will tell if the short term gains with labor cuts and other cost savings will hurt customer loyalty. Time will tell.

[GWTW]

ASM= Assistant Store Manger

[PoutyBarista]

Big whoop. It actually is BAD NEWS.

They made a small profit by cutting huge costs and closing loser stores, all while sales went down and customer counts went down.

Cutting staff and having dirty stores is sure one good way to decrease both sales and customer counts, year over year. Can't wait to see next year's EC sales.

[shot in the foot]

Sell your stock now! The euphoria will not last forever and reality will come to the surface again.

[Michael]

Stock is up 20% so far today.

[sbuxstockrocks]

Stock opened at $16. Dropped to $15.95 and then skyrocketed up to $17.39. Feel sorry for the sellers who got out first thing this morning. They missed out another 10% increase.

[OR SM]

Frankly, I'm excited. It's about time there was some good Starbucks news. I usually open and saw a LOT of new customers. I am excited for my store, because for once in a long time, we are actually making sales targets. Thank god. No wait, thank you customers for believing in my store. I appreciate every one of you that comes in.

[blarg]

eh by the time i would have been able to exercise my stock options in December the stock would have fallen back down anyway.

[Person with Insights]

Notice how Howard attributes the company's success to his transformation agenda. He wasn't saying that for the past 3 quarters when the stock price was tanking. In fact, he made painful efforts to stress that the company's finances were entirely tied to the recession. Now that the economy has bottomed out, he wants to say that his transformation agenda and his efforts brought about favorable earnings. What an ego maniac.

On the cost cutting topic, give credit to Cliff and Peter. Folks can hate them for putting strain on stores and store managers. I won't disagree if store partners express that viewpoint. However, purely from the perspective of delivering on a promise to cut costs, they stepped up and delivered. If it weren't for these two, the company would still be in trouble. They are the only two executives who actually know how to save money.

Michelle, Howard, and Arthur spend, spend and spend. Howard will be an undisciplined spass. It costs money to clean up the mess he creates. Ever hear the phrase bull in a china shop? Arthur has got ideas, but is completely indifferent to the costs of executing on those ideas. Anyone examine the cost of opening up the non-branded Starbucks store and whether it will generate a return on investment that is comparable to a branded Starbucks store? That's his baby, you know. Michelle is a dud. She needs to borrow ideas from outside parties. Invariably, we pay those outside parties.

In short, I'm please the stock price is up. I'm please we're making a decent profit. I'm terribly afraid of the long term direction of the company with Howard, Arthur, and Michelle in charge, especially as the company needs leadership as competitors like McD, Dunkin, and Nestle leverage their money and muscle to take away our customers.

[Tomoko]

This site is like a calsroosm, except I don't hate it. lol