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Archive for January 29th, 2009

In a totally partisan vote, House Democrats passed an economic stimulus bill 244-188 with Republicans unanimously voting against the bill despite President Barack Obama’s outreach to Republicans on the hill and his desire for a bipartisan stimulus plan. During President Obama’s campaign, he spoke frequently about being a different kind of politician and his desire for bipartisan support for his administration.

President Obama may indeed gain support from Republicans in the House and Senate however, whether or not that support is effective in governing,  may well be a function of whom House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid, choose to incorporate in their legislative agenda. Democrats won a resounding victory in the 2008 election ans are determined to govern to the exclusion of the Republican minority in Congress as evidenced by their passage of the stimulus bill. The Democratic leadership perceives the election as a mandate for change and they interpret change as the democratic agenda of the last four decades.

The divisive politics of old, are clearly the rule of the day on Capitol Hill. Barack obama should be aplauded for his efforts in reaching out to the minority party but, if he is unable to control the leadership on the Hill then the promise of his administration will prove to be nothing more than promise.

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Starbucks which became a global iconic brand in less then two decades announced today it was closing an additional 300 stores and laying off nearly 7,000 employees as same store sales declined 9% in fourth quarter year over year (YOY) results.

It should come as no surprise to investors, as consumers in the Age of Austerity, retrench and spend their coffee dollars elsewhere. Eliminating a $5 latte from their daily expenditures is a savings of $1,820. per year. Even with a $2 substitute from McDonald’s, a consumer can still save nearly $1,100. annually. Many American’s have joined consumers around the globe in recognizing that  Starbucks coffee, once considered a staple, is now a luxury.

Whether the company is able to resume the growth that it once had remains to be seen. There was a time in many urban centers just a few short years ago, when a Starbucks appeared to be opening on every urban corner. The company, after this round of closures, will have closed nearly a 1,000 stores since it began repositioning its brand a year ago. The company had previously stated that its global target was 40,000 locations. It should end 2009 at around 42% of that goal or 16,800 units.

McDonald’s meanwhile, stands to benefit from Starbucks cooling as their coffee sales heat up. This week they announced strong earnings as a result of nearly continued increases in same store sales and expect to open nearly 1,000 new stores around the globe as they remain best in class in the quick service restaurant category.

The results of McDonald’s and Starbucks, both iconic brands but, at opposite ends of the target consumer spectrum, are delivering a strong message about the current economy and their ability to adapt and succeed in this environment. As consumers continue to seek value McDonald’s should continue to deliver strong resultswhile Starbucks coffee continues to cool.

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