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| Starbucks gets burned by Wall Street analysts over high prices and too many shops | Starbucks gets burned by Wall Street analysts over high prices and too many shops |
| (1 day later) | |
| Core market growth slows for world’s biggest coffee chain as experts say it is struggling to match investors’ expectations | |
| Joanna Walters and agencies | |
| Fri 2 Feb 2018 22.47 GMT | |
| Last modified on Fri 2 Feb 2018 23.04 GMT | |
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| Wall Street experts scalded Starbucks on Friday with an opinion many caffeine lovers – and investors - have probably been frothing about for a while – the company has opened too many coffee shops and the price of a cup of joe is too darn high. | Wall Street experts scalded Starbucks on Friday with an opinion many caffeine lovers – and investors - have probably been frothing about for a while – the company has opened too many coffee shops and the price of a cup of joe is too darn high. |
| The Seattle-based behemoth – the world’s biggest coffee chain – now has more US locations than McDonald’s, but growth in its core market is slowing. It has been struggling for more than a year to deliver the increases investors have come to expect, stock market analysts said. | The Seattle-based behemoth – the world’s biggest coffee chain – now has more US locations than McDonald’s, but growth in its core market is slowing. It has been struggling for more than a year to deliver the increases investors have come to expect, stock market analysts said. |
| Starbucks itself cited reasons ranging from drink specials that failed to “resonate” and holiday merchandise that didn’t sparkle for customers to bottlenecks from a crush of mobile orders and weak afternoon sales. | Starbucks itself cited reasons ranging from drink specials that failed to “resonate” and holiday merchandise that didn’t sparkle for customers to bottlenecks from a crush of mobile orders and weak afternoon sales. |
| The company’s latest quarterly domestic growth was only 2%, below expectations, compared with a 9% jump in sales for the same period two years ago, and executives warned of a slow year ahead. | The company’s latest quarterly domestic growth was only 2%, below expectations, compared with a 9% jump in sales for the same period two years ago, and executives warned of a slow year ahead. |
| Wall Street analysts were not energized. “We believe the company has raised prices too much,” said John Zolidis, president of Quo Vadis Capital, a Paris-based boutique research firm. | Wall Street analysts were not energized. “We believe the company has raised prices too much,” said John Zolidis, president of Quo Vadis Capital, a Paris-based boutique research firm. |
| He added that the chain had opened too many stores, contributing to overcapacity in a crowded coffee retail marketplace that offers a wide variety of chain and independent cafes. | He added that the chain had opened too many stores, contributing to overcapacity in a crowded coffee retail marketplace that offers a wide variety of chain and independent cafes. |
| Starbucks had just over 14,163 US locations at the end of 2017, 25% more than five years ago and 127 more than McDonald’s. The company says it is not cannibalizing its own business, but financial observers disagree. | Starbucks had just over 14,163 US locations at the end of 2017, 25% more than five years ago and 127 more than McDonald’s. The company says it is not cannibalizing its own business, but financial observers disagree. |
| A Bernstein analyst, Sara Senatore, blamed “excess unit growth, at a time when Starbucks is reaching a more mature stage” as the root cause of the company’s domestic woes. | A Bernstein analyst, Sara Senatore, blamed “excess unit growth, at a time when Starbucks is reaching a more mature stage” as the root cause of the company’s domestic woes. |
| McDonald’s and Dunkin’ Donuts have kept prices of their coffees, such as $1 cups of drip coffee or $2 small espresso drinks, mostly flat, while Starbucks continues to raise its prices by about 3.5% a year, said a Maxim Group analyst, Stephen Anderson. | McDonald’s and Dunkin’ Donuts have kept prices of their coffees, such as $1 cups of drip coffee or $2 small espresso drinks, mostly flat, while Starbucks continues to raise its prices by about 3.5% a year, said a Maxim Group analyst, Stephen Anderson. |
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