Wait Time Curbs Sales at Starbucks

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 . . .

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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" . . .


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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.

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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

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