Starbucks is getting hit today, on same store sales at the lower end of the range. Q3 earnings (July 2), rose 16%, but comparable-store sales only rose 4% in July.

I cannot answer what its like at the rest of the chain, but the Starbucks in my building has such a long line every morning I simply bypass them. (I won’t even waste my assistant’s time on line there).

I see this everyday on my way in, and finally decided to take a snap of it:
click for larger photo
Cimg3193

Yes, that’s a line out the door and then down the block . . .

>

UPDATE: August 3, 2006 12:46pm

So I decide to send the above  photo in to Liz Claiman and Bill Griffeth of CNBC. I have no dog in this fight (i.e, no position in Starbucks), I am just annoyed I can’t get any in the morning.

CNBC uses the photo, and mentions the blog — traffic spikes! — but even more amusing is the stock’s reaction:  It makes up about half its losses.

A friend calls it "The Big Picture rally" . . .


~~

UPDATE: August 4, 2006 2:04pm

Sbux_1Its another edition of READ IT HERE FIRST: The WSJ runs similar pictures of long lines at SBUX:

Late Wednesday, the chain said sales in stores open at least 13
months, a closely watched measure, rose just 4% in July, that smallest increase
in nearly five years. That followed several months in which same-store sales,
while higher, still fell below the 8% to 10% to which investors had grown
accustomed.

While a 4% sales increase would be considered terrific at many
restaurant chains, the Starbucks news prompted an investor selloff. Even though
the company reported Wednesday that third-quarter net income rose 16%, its
shares yesterday tumbled 8%, or $2.66, on heavy volume to $30.64 in 4 p.m.
trading on the Nasdaq Stock Market.

Executives seemed baffled by the fall, saying that the real news
was their plan to open at least 2,000 stores during the current fiscal year,
which ends Sept. 30 — at least 200 more than previously announced — and move
forward on expanding in India and Russia. "Those are the indicators for us that
we’re in control of our business," Chief Executive Jim Donald said in an
interview.

Starbucks blamed the weak July sales growth on unexpectedly heavy
demand for cold, sweet Frappuccinos in the morning, spurred by heat waves across
the country. Frappuccinos take longer to prepare than most drinks because they
are mixed in a blender, topped with whipped cream and drizzled with sweet
toppings. That made Starbucks’s frequently long lines even longer, driving away
customers, the chain said.

>

Sources:
Starbucks Earnings Rise 16%; Wait Time Curbs Sales Growth
JANET ADAMY
WSJ, August 3, 2006; Page B2
http://online.wsj.com/article/SB115455211119624932.html

Are Frappuccino Woes or Frugality To Blame for Starbucks’s Stumble?
JANET ADAMY
August 4, 2006; Page A1
http://online.wsj.com/article/SB115462259310725842.html

Category: Earnings

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

66 Responses to “Wait Time Curbs Sales at Starbucks”

  1. WhateverMan says:

    Barry: pretty funny picture.

    What say you regarding the Europeans today? Specifically, the BOE?

  2. Mike M says:

    Nothing like a $4 latte and $3 muffin to start your day off right! Healthy for the body and the wallet.

  3. Abhay says:

    Two things:

    1. Those people are way too kind, in my neck of the woods, you would have people much closer together.

    2. You know what the answer to longer wait lines is — more starbucks!!

  4. Chief Tomahawk says:

    So, does this picture lend support to the claim it takes too long to make a Moca Latte?

  5. lola says:

    That’s the same line that is outside Sprinkles in Beverly Hills all day long except they only sell cupakes.

  6. emd says:

    Wonder how many are waiting in line for the 700+ calorie Banana Coconut Frappuccino…. maybe they should run around the block a few times first.

  7. Marko M says:

    Leads me to the old STYX song
    “Too Much Time On My Hands”

  8. Bynocerus says:

    “Wonder how many are waiting in line for the 700+ calorie Banana Coconut Frappuccino…. maybe they should run around the block a few times first.”

    Given block sizes in New York City, you’d have to run around the block five times to equal one mile.

    200 lb man running @ 8 MPH = 160Cal/mi

    So, one would need to run around the block 22 times to burn off that Banana Coconut Frap. Given how long that line is, though, you’d could probably finish your run before you got to the front of the line.

  9. Royce says:

    That picture reminds me why I’m not a coffee snob. Go down the block to the guy in the trailer. It’s faster and cheaper.

  10. Brian says:

    At the Starbucks nearest to me it’s very hard to get a seat when you’re laptoppin’ especially in the evening. It’s packed with a lot of kids who’ll be buying $5 coffee for the rest of their lives. The second closest one has a drivethrough that usually has 10 cars in line.

    So I’m saying I wish I bought SBUX a couple years ago when I thought about it. Maybe it’ll go down another 10%.

  11. me says:

    ” (I won’t even waste my assistant’s time on line there).”

    I like that, can I nominte it for snark of the day?

  12. MrMarket says:

    sheeple….

  13. snook says:

    Now I know there are too many NYC Downtowners with too much $ and too much time on their hands. “My’ Starbucks in 93101 gives away coffee to homeless people. Nice group to meet 1st thing in the AM!!!!!!!!!!

  14. spinning head says:

    Every time I see people lined up to spend $4 for a cup of coffee I wonder how many of them have a well funded IRA or 401k.

    $4 once a day, add in some compounded interest (say 8% from a stock fund), and in 20 years you’re talking some real money! $67,316 to be exact.

  15. Rusty says:

    Isn’t coffee supposed to make you more productive during the workday? How are you more productive if you are spending an extra half hour in line?

  16. Rusty says:

    One other thing – when is the Long Tail going to start kicking Starbucks’ ass? It’s taken too long already. When you break it all down, the only differentiation that people are standing in line for is printed paper cups.

    Who is with me on starting a “design your own to-go cup” venture?

  17. joe says:

    This is what Dunkin Donuts perfected in the northeast – incredibly fast service. In my suburb growing up, I used to wait in line in the drive-thru, which had at least 5 cars in it, and still get my coffee and donut in less than 60 seconds.

    Now that I live in a city without Dunkin Donuts (St Louis, MO), I goto Starbucks b/c its the only place with ice coffee in the summertime. However, I ask for just ice coffee and they even have the gall to ask me if they want me to leave room for cream. Who gives a damn? Seriously. I understand the “spoil the consumer” business model, but at some point I dont want to be spoiled, I just want a cup of coffee.

  18. how hard can it be to buy your own espresso machine?? you don’t have to wait in line, you can have a coffee every 5 mins, and you’re no longer being ripped off by paying $4 for a coffee that cost maybe 10 cents to make.

  19. Larry Nusbaum, Scottsdale says:

    Starbucks is not in the coffee business. One cup of their regular coffee or cappuchino coffee will tell you that.
    Ever notice about half-way down a cup of Starbucks coffee a slight bitter taste? Well, it’s there on purpose. It’s the way they roast their beans. They are purposely overcooked (burnt) because it’s a formula that America seems to like. Americans simply don’t know (nor understand) good coffee.
    So, what do I like and what do I consider good? #1) IllyCaffee makes the worlds best expresso coffee. Everyone in Europe, and many in America, know it. First, it’s the fine Arabica bean that is harvested in So America and Africa and then perfectly roasted, the Italian way. Then, they pack it in sealed containers using inert gas for freshness. Now, it ain’t cheap. But, the family run company isn’t as big as my second favorite: La Vazza, which is probably the top seller in Europe. La Vazza makes drip, where Illy really doesn’t.
    Now, here’s the beauty of Italian roast expresso: IT IS FLAVOR FILLED, BUT NOT CAFINE SPIKED. I have had many an expresso prior to bed….no problem.
    When in San Francsico, I suggest people visit Caffe Trieste, a family run “coffee house” opened in 1957. There, they roast and sell their own coffee. It’s where cafe society all began during the beat generation in the 1950s, and a personal favorite of mine since 1977.
    BTW, I just returned from Vienna and Prague, where everyone serves great smooth cappuchino!

  20. Larry Nusbaum, Scottsdale says:

    Caffeine

  21. Craig says:

    You are all missing the point……..

    This is a big pullback on a company selling addictive drinks. This isn’t about YOU!!!! You guys are all playing the latte factor.
    For me, and for you, it should be about the LINES.

    EVERYONE needs to go to the Pacific Northwest just once, AND to figure out coffee. Dunkin’ Donuts for coffee? REALLY? There is no accounting for taste.

    For a culture that drinks so much of a product, we are pathetically ignorant of what constitutes good coffee, properly made. This not to say Starbucks is the ideal, it isn’t, but Dunkin’ Donuts isn’t even in the same universe.

    Some coffee purists would poo-poo the icy summer drinks. I don’t. The Frappathingies are to get the people paying into my retirement to stand in line when it’s hot.

    The hot coffee drinks get them to stand in line and to pay into my retirement when it’s cold out.
    However, these line standing customers DO know coffee from the colored canary piss that passes for coffee almost everywhere else.

    Quick, someone figure out how much an investor is making on that line…….

  22. glenn says:

    I think Barry knows a little bit about good coffee too.

    http://bigpicture.typepad.com/writing/2004/04/ahhh_coffee.html

  23. Larry Nusbaum, Scottsdale says:

    “However, these line standing customers DO know coffee from the colored canary piss that passes for coffee almost everywhere else.”

    No…..they don’t. Not if they are in line for that mud.

  24. Craig says:

    BTW, Illy is predominantly Brazillian Cerrado and is purged of oxygen with inert nitrogen which prevents oxidation. It is excellent. Brazilian Cerrado is suited for their roast. Nobody buys more top quality Brazilian coffee beans than Illy.

    I roast my own which kills all other sources for taste and freshness, including Illy. I try a different varietal every day. $4.00 a pound green. Takes me about 15 minutes to roast 2 days worth while I read this blog or trade.

    Also, Starbucks sells more dairy products than coffee by far. Some don’t like a full city roast, so Starbucks also offers their “lightnotes” roasts which tend to be Central American varietals like Costa Rican and Guatemalan that are better suited to a lighter roast.

    Not all Starbucks coffees are dark full city/vienna type roasts, but it is by far the most popular.

    The worst espresso I ever had was in New York City, before Starbucks existed there. Made all Starbucks taste like Illy!

  25. Craig says:

    They aren’t!
    They are standing in line for a Frappacino.

    And to donate to my retirement.

    When they stand in line for “coffee”, it will be more for dairy products than Coffee. And as a wintertime comfort pick-me-up.

    The Starbucks roast is designed to stand up to the drinks they offer, which are variations on the European coffee theme, with milk, chocolate and flavored syrups.

    All those things would bury Illy flavor.
    Illy is meant for REAL espresso, cappuccino.

    That isn’t what those customers are waiting in line for.

  26. Larry Nusbaum, Scottsdale says:

    GREAT POSTS CRAIG!

  27. niblettes says:

    In downtown Vancouver, on the corner of Robson and Thurlow you will find 2 Starbucks kittycorner to each other. As absurd as that sounds, it seems to work–for those who actually like Starbucks.

  28. Bob A says:

    I don’t go to Starbucks just because I can’t stand to be around people dumb enough to wait in line for a cup of coffee.

  29. Craig says:

    Drink up Larry!

  30. yc32 says:

    SBUX CEO sold close to one mil shares in the last week of June at about $35. Last time he sold so many share, it was Dec-04.

    I suspect the waitline to sell SBUX is just as long.

  31. Royce says:

    “For a culture that drinks so much of a product, we are pathetically ignorant of what constitutes good coffee, properly made. ”

    The idea of going to the Pacific Northwest to be hectored about how I don’t understand what good coffee is just so appealing, I can’t imagine why I’ve passed up the chance until now.

  32. babycondor says:

    Is that CRAMER over there on the right with the cellphone?

  33. donna says:

    If you have a nice cup of green tea in the morning instead, you’ll get your caffeine and spend your day far less stressed, thanks to the chemicals in the tea that keep your cortisol levels from rising. Even one cup of tea before your coffee helps.

  34. Miriam says:

    Obviously you don’t live in Seattle, where there SBUX abounds. Seriously, I can walk to four outlets, and I’m in a RESIDENTIAL area.

    I get my money’s worth of Starbucks… in a vending machine for free in the work kitchen. Real coffee is Batdorf & Bronson’s or Peet’s or Murchie’s or a gazillion other brands that aren’t over-roasted. Real espresso I get at a friendly independent neighbourhood coffeehouse (although I can honestly say SBUX is local…)

  35. jkw says:

    People generally know what they like. Just because you don’t have mainstream tastes doesn’t mean everyone else is stupid or doesn’t know what good coffee is. What kind of snobs are you?

    Personally, I can’t stand coffee. The smell really bothers me. I react to coffee about the same as I react to cigarette smoke. The difference is that I know being around coffee isn’t actually bad for my health, it’s just unpleasant. What I really dislike is when people put coffee into perfectly good chocolate and don’t even bother mentioning it when they offer the chocolate to other people. It makes me feel sick for a while afterwords if I don’t spit it out immediately.

    My strong dislike for coffee means that I can tell the good stuff from the bad stuff. What coffee snobs call good coffee is the stuff that makes me feel like throwing up when somebody carries an uncovered cup of it past me. Burning the coffee makes the smell much worse. I definitely agree that Starbucks burns their coffee.

  36. Jeff says:

    They should call it “Moonbucks”. Is selling roses at airports part of their growth plan?

  37. derrick says:

    Funny, Cramer was talking about this on his afternoon radio show on 92.3 today.

  38. ~ Nona says:

    Donna, thanks for the reminder about tea, which I’m beginning to appreciate more and more.

    As for coffee, I’m utterly astonished by Starbucks’ success. I lived in Europe for a few years and learned what coffee can really taste like. I’m not a snob; I just know the difference. *Sigh*.

  39. Then Again, Those Lines At Starbucks Are Pretty Damn Long

    We literally howled with laughter this morning when Starbucks said it had lost revenues because it was making so many of those sugar-coated cold drinks in the hot summer. But maybe we were too quick to judge. Look at…

  40. emd says:

    from a comment on another site…..

    “I endured a Starbucks drive thru the other day so I can get a iced decaff latte (Venti) and there were 6 cars ahead of me. Total of 7 drinks were presented ahead of me. Time spent from reaching the line until I got my wife’s drink: 30 minutes! How much did Starbucks bring in during those 30 minutes: $28 or so?”

    I think that says it all.

  41. M.Z. Forrest says:

    Lipstick on a pig. Boy a lot of people think she looks beautiful. 4% really isn’t that bad. Starbucks isn’t so young anymore and double digit same store growth seems a bit much to expect. Of course, I have been looking to short this child for over a year. Personally, I’m thinking Krispy Kremes.

  42. Craig says:

    LOL! Peet’s IS the original full city roast.
    Starbucks followed the Peet’s roast profile although they (Peets) do a good job of retaining some of the varietal flavors.

    Roasting coffee is like grilling a steak. Some like it rare with little carmelizing/charring, some like it medium, some like it well-done. Some like a drum roasted traditional coffee and some like air roasted coffees for their cleaner flavors. Same deal.

    No one here would say one is better than the other. They would only be stating their preference. Same for coffee.

    I love a dark roasted Batdorf and Bronson (just a few miles from my house) but I don’t really care for the acidity of their lighter roasts. I prefer my coffee sugars a bit more carmelized. That’s all we are talking about.
    It’s not burnt unless it’s french roast or vienna. THOSE are purposely burnt and taste bitter.

    REAL fresh roasted coffee is sweet, floral, sometimes tropical, woodsy. Almost like fresh bread while roasting. A pleasurable experience to nose and palate.

    Some of you are smelling (tasting) folgers and Dunkin’ Donuts and thinking you know the smell (taste) of coffee.
    That’s really the aroma of wet cardboard.

    Coffee varietals are easily as complex as fine wines.

    To know the real taste of coffee requires fresh roasted and ground high quality beans, a quality burr grinder, pure 200 degree water and a proper filter, preferrably a gold mesh filter, french press, vacuum or Technivorm drip brewer.

    Proper espresso can’t really be had in the home for under about $400+/- up to about $1200 for a machine with a solid brass brew head. You will need the spendy grinder for espresso.

    If you don’t have that, find a Specialty Coffee house with Illy Caffe and use their machine……that’s what you are paying for. The commercial machine, quality fresh coffee and the milk. The coffee and milk anyone can get.

    I’m not astonished by the lines, I’m happy. I made about $2000 today on Starbucks. I love the lines. And Coffee.

  43. Jim Bergsten says:

    Not to cast aspersions (this damn comment thing needs a spelling checker!) on Barry’s fine photography, but there are a few things about the picture that make me suspicious:

    1. The line is (way) too short.

    2. Everybody isn’t on their cellphones (note how I cleverly skirted the personal pronoun gender issue by using poor grammar?)

    3. The people are, in fact too far apart.

    4. There isn’t a single crime (nobody being held up, pickpocketed, etc.).

    5. There aren’t enough people in “metrosexual” garb, though this might be a function of that part of town.

    6. If this is the financial district, people look way too calm.

    In any event, I see three solutions to Starbuck’s plight:

    1. Bigger stores (won’t happen — no space in NYC).

    2. Faster service (in NYC? Surely you jest).

    3. More stores, in fact, one for every person on earth. This would work, but would kind of eliminate the social aspect of this overly expensive enterprise. Plus, who would make and serve the stuff?

    My brain’s fried — I need more caffene!!!!

    Jim B.

    p.s. As for “my assistant’s time,” it’s good to be the king. Oh yeah, another business idea, Starbucks “runners.”

  44. New says:

    European coffee is almost as much of a joke as American coffee …….
    spend some time in Brazil , Columbia , Venezuela and drink real coffee

  45. Craig says:

    They don’t grow coffee in Europe.
    All European Coffee comes from elsewhere.
    After initial selection it’s all the same. The beans are purchased in auctioned lots after cupping (tasting). The best tasting coffees go for the highest prices. Green beans don’t lose anything being shipped from coffee growing regions. So the difference between “European Coffee” and coffee in South and central america, Indonesia, africa, etc. is what?

    Preparation. Roasting, grinding, brewing. Proper preparation can happen anywhere, even Europe and America. So it doesn’t matter if I drink Brazilian Cerrado in my living room or in Rio. The actual coffee is identical.

  46. Larry Nusbaum, Scottsdale says:

    “So it doesn’t matter if I drink Brazilian Cerrado in my living room or in Rio. The actual coffee is identical”

    Try saying that while sitting in the corner on a Saturday in Caffee Trieste in San Francisco, while the family is singing Italian opera……….

  47. Jim Bergsten says:

    Thanks, all, you’ve given me an epiphany (if you look “epiphany” up, skip over the religious definitions, those aren’t what I mean here).

    Blog comments are, in computer parlance, “write-only” data. Nobody reads and comments on the topic, they just “add” to be “heard.”

    So, lines at Starbuck’s (implying business conditions) morphs into “what is good coffee?”

    Or even worse, a dopey diatribe on blog comments.

    Oops. Nevermind. Sorry I brought it up.

  48. angryinch says:

    Don’t know about drinking SBUX’s coffee, but I’ve heard many swear by it for enemas. Perhaps an untapped market SBUX could exploit for the next leg up, so to speak?

  49. Craig says:

    Sorry Larry. I mean no difference in the coffee.

    I’m sure Caffe Trieste’s ambiance adds something to the experience and the coffee surely seems to taste better as a result! My couch isn’t at Caffe Trieste though and they won’t allow my dog. That and it’s a hell of a drive from Western Washington! I’ll have to settle on my local Batdorf or Cafe Vita sans opera.

    And for those pissed off about morphing threads, did anyone see the story on line timing at Starbucks for cold VS hot coffee drinks on CNBC?

    Apparently it takes just over twice as long to turn out a Frozen Frappathingy than it does a hot espresso whipped cream steamed milk flavored syrup dessert drink. So apparently there is something to the same store sales suffering due to hot weather/cold drinks.

    Bummer of a quality problem.

  50. Ron says:

    this site’s comment board is chalk full of insight, the discussions have morphed from “you don’t know what causes inflation, I DO!” to now “peon, you don’t know what good coffee is, I DO!”…..

  51. angryinch says:

    Actually, Ron, it’s “chock”, not “chalk”.

    As in “Chock Full O’ Nuts”.

    See, it always comes back to coffee.

  52. Tom C., Stamford,Ct says:

    40x ’07 earnings? No thanks. Maybe at 22 1/2.

  53. whipsaw says:

    Interesting that some spoke of coffee in Europe without mentioning that it is often blended with chicory which may be why they consider it superior. FWIW, I usually drink SBUX’ Sumatra that I grind myself, but I also enjoy French Market Coffee out of NO which you can buy online if you can’t find it in the grocery store. Relatively cheap, very smooth even when strong, nice companion to creme brulee and cognac.

  54. jp says:

    there was still a line at 2pm in the afternoon.

  55. brion says:

    Now if y’all want some REAL coffee…..

    Antarctica baby……Cool, yet harsh as a baby seal kill! (oh yeah)

    Brazillian Cerrado eh?

  56. Bob A says:

    When Starbuck’s starts selling coffee enema’s I will be the first in line!

  57. Rich In NNJ says:

    One thing I noticed is everyone is pretty respectable of personal space while on line.
    I like that.

  58. Craig says:

    Great find Larry!

  59. JJ says:

    Ron
    sad to say , but ,
    the debate about coffee is more insightful than any other thread I’ve seen on this site in 3 months

  60. Rochelle says:

    The picture you posted is a bit misleading – I used to buy my coffee there (230 Park Avenue, NYC) every morning so I’m familiar with that particular location. The store is too small for a line to form inside – so the people you see waiting outside are the only people waiting.

  61. ct says:

    Last week, Starbucks was giving away free iced coffee. The lines were enormous, in light of this free give-a-way. Any chance that those photos were taken on that day and are, for that reason, a bit misleading as to what a typical Starbucks wait actually is?

  62. justpicky says:

    There’s a new Starbuck’s in town, I dont see why they built it here , why because businesses in this town , will end up closing in a year or two . People in this town are average “joes” and they arent going to spend there precious money on coffee. If anything they better save it for gasoline , since its $3.10 a gallon .

    If you want coffee , buy a Mr Coffee maker , and buy coffee at the store and save yourself money , gasoline , and Time. People are wasting to much of everything , not conversative enough.

  63. coffeehound says:

    One reason the StarBucks stock may have fallen is the fact that their coffe is over-roasted (i.e., burnt) and really isn’t worth the price. My local coffe house sells a much better latte (double, skinny, no foam, 12 oz cup to go) for $3.52. Also I purchase their bean Mystery Espresso for about $13.50/lb. and use it in my machine at home. Talk about price-wise!!

  64. Dave says:

    Ok, I admit it, I like starbucks coffee. It’s good, it’s tasty, way better than gas station coffee. The long lines make perfect sense to me.

    What I can’t figure out is the long lines at Panda Express, the worst excuse for chinese dog food I have ever tasted. It looks like the same well dressed professionals are standing in that line, too. Are people that gullible? Apparently so. Sad, really.

  65. Miranda says:

    I am at Starbucks seven days a week. Some of my friends work there, some of my friends study there. We have a nice social scene at Starbucks that is not only fun, but comfortable. Espresso drinks and frappucinos might not be cheap, but drip coffee is only a couple dollars and refills are 50 cents.

    I may be the cliched 20something who hangs out at a coffee shop every evening after work – but it sure beats getting drunk at a bar.

    The Starbucks we hang out at is always busy (though sans the huge line out the door). The only reason I can think of for their profits to be down is that people are buying smaller drinks (rather than Venti size) and not spending as much on the pastries (which really aren’t worth the price with rare exception) and sandwiches.