Posts Tagged ‘Starbucks’

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.

Read Full Post »