Samstag, 2. Mai 2009

Double Decaf Hazelnut Latte anyone?

To what extent are American consumers cutting back on non-essentials? If Starbucks is any guide, they are doing so quite a bit:

In the quarter ended March 29, Starbucks US revenues were down 7 % yoy. In the previous quarter, the decline had been 6 %.

"Comparable store sales" were even worse, declining 8 % yoy (5 % fewer transactions, 3 % lower bill-size per transaction). In the previous quarter, the decline had been 10 %.

International revenues are down even more sharply (-12 %), but that's due to aggressive downsizing in Australia, and a sharply lower British Pound (Starbucks does not seem to publish fx-adjusted sales data).

Mind you, Starbucks is far from going bankrupt: In spite of massive restructuring charges, it still managed a small profit for the quarter (25 m $, after 65 m $ in the previous quarter; down 77 % yoy).

Anyway, the market still believes in Starbucks, it seems:

Shareholders equity is 2.6 bn $ (2.3 bn $ after deducting goodwill and intangibles). Yet market capitalisation stands at 10 bn $. The stock price has nearly doubled from its low in November 2008.

Extrapolating net income for the last two quarters to the full year, P/E is only... 55. Yes, I suppose the market does believe that current performance is just a temporary setback.

(By the way, I didn't manage to figure out how much of Starbucks revenues and profits comes from China: You'd think that sales volumes are substantial, what with more than 100 stores in Shanghai alone. But strangely, the quarterly reports never mention the word "China" anywhere. As for the annual report, it does at least tell us that the number of company-operated stores in China reached 178 as of Sept. 28, 2008, with another 269 stores licenced out - these should be the stores in Shanghai/Zhejiang/Jiangsu, which are operated by Taiwan's UniPresident. While 447 stores may sound impressive, China only accounts for a mere 2.5 % of all Starbucks stores worldwide. And judging from the many smallish and half-empty Starbucks restaurants I've encountered in Shanghai, I assume that China store sales are quite a bit lower than the worldwide average, i.e. China revenues should be less than 2 % of total revenues. No wonder they don't bother to disclose any details...)

(To see how archrival McDonald's is doing, check this post)


  1. There was a time when people thought that evil Starbucks was plotting to take over the world.

    Now it turns out that Starbucks is just a normal company after all.

    Probably Starbucks was just created as a diversion, to confuse people, and McDonald's has been the real villain all along!

  2. Yesterday my friend and me visited one Stabucks located in Zhengda Squre, Shanghai. They expanded to 3 times bigger than last year, occupying a quite huge area, and it was full. We were lucky to get a table from two leaving people, so other unlucky guys just took their coffee and walked away.:-P