The Bottom Drops Out on Starbucks...

I've been waiting for this. Even here, in quasi-rural Virginia the density of Starbucks has now exceeded that of McDonalds. There is one spot, around our nearest mall, where there are now at least 7 Starbucks inside a 2 mile diameter circle. Our local grocery chain, Farm Fresh, is putting a Starbucks kiosk in all their new and renovated stores.

Despite all the openings, it's down the tubes time. (Guys, this is called "market saturation". You might want to look the term up.) -

Starbucks Corp. said Wednesday its fourth-quarter profit slipped 5 percent, but only because of changes in accounting rules. Despite solid revenue growth and a record number of new store openings, the results sent the stock sinking in after-hours trading.

Uh-huh. Those pesky accounting rules are doing it again.

Revenue for the quarter was $2 billion, up 20 percent from $1.66 billion in the same period last year...Starbucks opened 2,199 new store stores in fiscal 2006, setting a company record and boosting its worldwide store count to 12,440.

So you have 21% more stores than a year ago, and your sales revenue, not accounting for inflation, has increased by 20% in the same period. The Consumer Price Index is up 1.3% over a year ago, so their adjusted revenue growth is more like 19%. It would be interesting to look at their quarterly filings and see what same-store-sales have done over last year. I suspect they are way down.

Still, you gotta love this quote. -

Some analysts voiced concerns about increased payroll costs, which the company attributed to staffing more stores with assistant managers. Chairman Howard Schultz said it was part of a strategy to make sure the company has enough trained managers to keep its steadily growing number of stores running smoothly.

Should I be amused that not all stores had assistant managers before? I mean, what happens when the manager isn't there? Who's in charge? On the other hand, given the penchant for fast food places to make assistant managers out of anyone who lasts 6 months, this makes a sort of twisted sense. We'll give these guys there own stores to manage!

Though I'd also note that the first stores were big, spacious and full of comfy chairs, and then the new stores were smaller with cafe tables, then tiny with a drive-through window, and now a kiosk in my grocery store. Coming next, a guy with a cart on the street. Damn, too late, they're already here. Gosh, what a privilege to be the "Manager" of one of those.