Starbucks Recession Woes Continue But Stock Rallies Anyway
Here at STTG we are addicted fans of Starbucks (SBUX), committed enough that we traveled to three different stores to get a Gold Member’s Card before they all were sold out (they still are extremely difficult to find).
It seems that even us hardcore Starbucks drinkers though were not enough to prop up sales amid this ugly recession.
From Marketwatch:
Starbucks, jolted by the weak economy, said Wednesday it plans to close 300 more coffee shops, further slow expansion, and cut more jobs. Its profit dropped 69% in the latest quarter, missing analysts’ expectations.
Starbucks has stumbled amid mounting job losses and tighter consumer spending. A year ago, the coffee-shop chain embarked on a plan to rejuvenate its business after weaker traffic trends began to surface, prompting Howard Schultz to return as chief executive officer.
And while the economy is a great source of blame for these troublesome times, increased competition from McDonalds (MCD) and Dunkin Donuts isn’t helping much either.
Regardless though Starbucks stock rallied strong on heavy volume yesterday and today is closing in on $10 per share. The stock is trading above its short term moving averages (10, 20, 50) and needs to cross above $10.40 where it has faced the most resistance as of late. A move through this area though could allow the stock to add gains of up to 25%+ before it runs into its next resistance at $13.
Source:
Starbucks to close more stores as profit drops
Matt Andrejczak
MarketWatch, January 28th, 2009
