The $5 million coffee break
In Howard Schultz' memo to employees (Transformation Agenda
Communication #8), he outlined the reasoning behind closing all the stores
today for three hours. While I'm all in favor of an employee "stop down," I scratched
some figures on the back of a recycled Starbucks napkin. Let's see, divide $9.8
billion in annual revenue by 7100 stores by 360 days you get $3841 per day. Multiply
that by 3 hours/16 hours times 7100 and I come up with $5.114 million - all "to teach, educate and share our love of coffee..." I believe they
already have a very good barista training program and I rarely see them make mistakes.
Even though the stock was up today I'm still bearish on SBUX. Howard's come in
to set things straight and I wouldn't bet against a maniacal returning CEO. Even
if you buy it under $18, you may be sitting a while to see any kind of move
upward, just like your Apple and Google - these are out of cycle. As Starbucks
cuts jobs, and gives away free wireless Internet, I still believe people will scale
back on what most consider a luxury purchase. I'm not a daily Starbucks drinker
but rather visit once or twice a week as a personal treat. They could have used
the $5 million to pay for nearly 2 months of high-speed T1 service for WiFi at
all their locations and had a podcast instead.
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Paul,
Great blog! I wouldn't be that skeptical about the strong message sent throughout the whole organization about the need to change with this sort of bold -although costly- initiatives. It has shock value. Having said that, I wouldn't hold my breath on SBUX. If Schultz can pull it off, it will take years. SBUX taught Americans how to drink coffee, but it also taught competitors how to brew it, as good if not better and at a lower price point. Right now, there is not visibility about the strategic options for SBuX. Back to basics will not be enough.
Rafael - Thank you for your comments. I'd be anxious to see how McDonalds has done with their new coffee offering. With a SBUX on every corner, sometimes we get too much of a good thing. Look at Home Depot, they recently throttled back their rapid store expansion/construction and their stock went up.
PL