01 February 2008

A True Sign of A Troubled Economy

From MarketWatch:

Starbucks collides with a sluggish economy
Commentary: Plenty of investors saw it coming
SAN FRANCISCO (MarketWatch) -- Starbucks shares got clobbered at the open Thursday, falling as much as 6% after serving up disappointing fourth-quarter earnings late Wednesday and announcing they are scaling back expansion plans that, frankly, many investors doubted were sustainable.

No cause for panic, but it is time to wake up and smell the economic realities of 2008.
SBUX 18.84, -0.07, -0.4%) built its fortunes as a purveyor of luxury and convenience to a nation floating on consumer confidence. No one needs to plunk down $1.55 for a cup of coffee. Even the most hardened caffeine addicts know they can brew their own for a lot less.

With the economy sliding ever closer to recession and the latest jobless numbers out of Washington showing more folks out of work, the spasm of belt-tightening by consumers is bound to put Starbucks near the top of the casualty list. Their fourth-quarter results merely confirmed this.

Starbucks' initial plans for 2007 called for 1,600 new stores in the United States alone, or more than four openings a day. That number has since been whittled back to a mere 1,175 new stores, adding to their already vast 11,160-outlet domestic empire.

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