Starbucks Stinks

By Douglas A. McIntyre Published Aug 2, 7:30AM EDT

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Starbucks Stinks — © starbucks spill (CC BY 2.0) by Eric

What does Wall Street think about Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) earnings and new CEO Laxman Narasimhan? Very little, it turns out. The coffee shop company’s stock is up only 2% this year, while the broader market is up 20%. This happens during a period when, after being an apprentice CEO, Narasimhan took over from long-time CEO Howard Schultz. Maybe the board should bring Schultz back again. (These big company CEOs are paid 1,000 more than their employees.)
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New Starbucks earnings were disappointing as far as revenue was concerned. CNBC said, “Starbucks on Tuesday reported quarterly earnings that beat analysts’ expectations, but its same-store sales missed Wall Street’s estimates.” Reuters made similar comments.
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Starbucks earnings were not all bad by most other accounts. Same-store sales rose 10% from a year ago. Revenue was up 12% to $9.2 billion. Earnings were up 25% to $0.99 per share. Starbucks has grown to have over 37,000 stores.

Narasimhan said the company’s Reinvention Plan was working. One must wonder what that plan is beyond revenue and same-store sales increases. Companies often give names to these initiatives, although they do not mean much.
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No other public company is a perfect match for Starbucks in terms of stock price. McDonald’s, sometimes used as a comparison, is up 10%. But Starbucks does not serve hamburgers or milkshakes. The coffee shop company can only be compared to itself, historically. Over the past five years, Starbucks stock has increased by 94%.
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Investors may see a Starbucks store on too many corners around the United States and think the market is oversaturated. Starbucks says this is not true, that it can continue its growth at home and overseas.

The only certain thing is that Narasimhan has been a poor steward, at least for shareholders. He will not keep his job for long, if the past is prologue.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.