Starbucks: Great American Success Story - Or is Trouble Brewing?

Eddy Elfenbein submits: Today, Lindsay of Wallstrip goes on a Starbucks (SBUX) run.

If someone came up to me a few years ago with the business plan of selling overpriced coffee, I would have thought they were crazy. “Sir, I assure you that Americans are far too intelligent to fall for something as transparently phony as a triple latte!”

Sadly, this is why I’m not a bazillionaire.

What else can be said about Starbucks? It’s a great American success story. Fifteen years ago, the stock went for about $21 a share. After five 2-for-1 splits, that works out to a split-adjusted price of 67 cents a share. SBUX’s 52-week high is $40.01 a share. That’s about a 60-fold gain.

But trouble could be brewing [BA!], the stock has fallen 25% twice in the past year.

Comments

[Jamaicatty:]

conclusion without evidence. Where is the rest of the story here??

2007 Mar 23 08:29 AM

[Eddy Elfenbein:]

This part was cut off:

But trouble could be brewing (BA!). The stock has fallen 25% twice in the past year. Howard Schultz, however, isn't giving in easily:

Schultz, who lamented a nearly 10 percent slide in the company's stock in the past year, asked shareholders not to lose confidence in the world's largest specialty coffee retailer.
"I'm here to tell you that I believe that there's never been a better time to be a Starbucks shareholder," Schultz said. "We are building Starbucks for the long term, and I would hope that after 15 years...you would give us the same trust that you have in the past."

2007 Mar 23 09:41 AM

[cptsky:]

Sbux, Starbucks is a strong company with an excellent business model and strong growth.
At first the concept of a "coffee shop" with over priced "good" coffee sold in little shops all over America seemed an impossible dream. But, people love it and it's because there just aren't that many places where people can simply drink a coffee, be left alone, sit in a comfortable chair, and relax. Most American restaurants in the U.S. don't have even comfortable seating, and service is practically non existent. So SBUX caught on, perhaps first in malls or airports, and from there it's been all "up" hill.
I'm in the middle east and there are malls here that have SBUX coffee shops even in clothing stores. Seems people just love to talk and relax, and have an "overpriced" latte. But the pricing isn't just for coffee, it's what people are willing to pay for; something more, relaxing, comfortable places to sit and chat or read a "free" paper, or surf the webb. So, I've become a SBUX believer, and the more study I do of the company the more I believe that this is just one great idea.
When my son who was in college he got a job at SBUX It paid good money for a kid, and there were benefits like health insurance and profit sharing. Starbucks treats their people well and with respect. That's a model that would server American Business well, but unfortunately isn't in the scope of American Capitalism.

Mar 21 12:56 AM

[User 485311:]

This article is great. The first couple of sentences sums it up greatly when it says as follows: "If someone came up to me a few years ago with the business plan of selling overpriced coffee, I would have thought they were crazy. “Sir, I assure you that Americans are far too intelligent to fall for something as transparently phony as a triple latte!”
I was just talking to a friend not too long ago about the successful business model of Starbucks and we were laughing at how absurd it sounds.

Sep 12 02:32 PM