Whole Foods' disappointing report spooks Starbucks investors

This story says investors are concerned about consumers' willingness to spend money on pricier staples. Starbucks shares fell to a six-month low on Tuesday, although they rebounded Wednesday. "People are reading something into Whole Foods' announcement," says an analyst. "Investors tend to think of Starbucks and Whole Foods markets as being a similar demographic." Are people going to temper their Starbucks spending because of higher gas prices and other economic factors? I doubt it. (Reuters)
> Starbucks' same-store sales rise 4% in Q3, disappointing analysts
> Starbucks to buy back up to 25 million shares of its stock

Comments

[Amy Alkon]

Starbucks is a relatively cheap luxury item. I would think the contrary is true.

[Becca]

Since when are frappuccino drinkers the same demographic as organic pasta eaters? If anything, it just means that people will stop at starbucks on their way to the bus/train, rather than in their car. But honestly, most of our starbucks customers arent' too worried about finances.

It's a luxuary item when people buy $4-5 drinks everyday or twice a day. That's around $200 a month, which is more than I spend on gas a month, and I live in Seattle (one of the more expensive area in the country) and commute a total of 40 miles everyday. If gas is consider expensive, then there's no reason not to consider Starbucks an unnecessary luxuary item.

[johnmoore (from Brand Autopsy)]

Think back to SBUX pivotal growth years from 1990 through 1995. The US economy was in the pits yet the sluggish economy didn't stop people from buying expensive coffee. Nor did the poor US economic conditions stop SBUX from growing. In 1990, SBUX had 84 locations and by the end of 1995, SBUX had 677 locations.

SBUX has proven time and time again that its business is recession-proof. Wall Street analysts should know better. Then again, spooked investors create buying opportunities for smart investors.

[sbuxmanager]

Fortunately for sbux, people not being able to budget effectively is not a problem. People will buty their crack whether they can afford it or not. What I think we'll see is an increase in credit card usage at the stores. It's the quitinsential American way...buy crap you don't need with money you don't have.

[Boston Starbucks Rebel]

Flash: Starbucks stocks drop 9% Wednesday in after-hours trading due to sales growth of only 16% and same store sales comps of 4%. More to come later, could this be the beginning of the end of the Starbucks fairy tale?

[Whim]

I don't think so...looks to be trending up today again. Recent announcement of stock buy-back may have some effect.

[jafc]

The beginning of the end will be when SBUX management lowers their expected same-store sales comps from the current guidance of 3-7%. Historically they have averaged around 7% so every month if that "magic number" isn't met or exceeded the stock sells off.

Hey BSR, A single day of down trading is not a sign that the company is going to go out of business!!

[Harriet]

I tried like hell to cut back my Starbucks addiction, and I never got very far--until I discovered the Italian-made Moka pot. For $20 and a $10 tin of ground beans, I escaped the grip of $4 lattes for ever. If Bialetti ever goes gunning for the S'bucks consumer, that would be a threat.

[HopkinsBella]

Sbuxmanager,

An "increase in credit card usage"? At the store I worked at for a while (3-4 years ago), the customers were primarily old money, a few nouveau riche, and a lot of "faux riche." Credit cards for all groups were by far the standard for purchases. A few used debit, and only a couple would come in occasionally with cash.

[Dong]

SBUX earnings conference call transcript can be found at SeekingAlpha.com.

[STARBUCKS GOSSIP webmaster]

The conference call transcript is linked on the top item on the Starbucks Gossip main page.

[sbuxmanager]

Hopkinsbella,

Yes. I think we'll see even more credit card usage, (not debit) especially among younger people who have lots of debt. What's another $3-5, if you already owe thousands in credit card, student loan, etc?

[businessopportunities]

businessopportunities businessopportunities

[QuestionsforSBUX]

What is the average money made in a month at SBUX? How many sales are made?