Starbucks: Move Along, Not Much to See Here
Originally Published In the News July 9, 2008 10:05 AM
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Starbucks Corporation (SBUX-NASDAQ) clearly faces a long road back.They are closing 600 company-owned stores in the US in less than a year, all of which were unprofitable. About 70% were less than two years old, clearly their pell-mell expansion strategy went to far as new stores cannibailized old ones. They will incur lease termination costs of $120 to $140 million as well.
Earnings will be released July 30th, and ThinkPanmure has some thoughts on their near-term future:
Starbucks plans to release its 3Q08 earnings results, as well as updated guidance for the 2008 fiscal year, ending in September, on July 30, after the market close. The company plans to adjust long-term targets on the call.
We are expecting EPS of $0.01 on a GAAP basis and $0.19 without the one-time asset write down, for 3Q08.
We are expecting guidance for FY08 EPS to be lowered from “somewhat lower than the previous year’s $0.87” to closer to $0.80 on a proforma basis. We expect the company’s long-term targets to be lowered as well.
Takeaways
Though we are happy to see Starbucks taking steps toward improving profitability, we take these closures as another sign that the turnaround in the U.S. business could be slow and painful. We believe that Starbucks will remain a strong company and will emerge with an even stronger brand image, but we fail to see any near-term catalysts that will move SBUX stock significantly in either direction.
Sounds like a snoozer. Chipotle might offer more fireworks after they report. From what level is the question.
Oy vey
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