Sector Snap: Coffee Retailers Slide
Source: CNNMoney.com ()
NEW YORK (Associated Press) - Shares of coffee retailers mostly dropped Friday after a lackluster fourth-quarter report from Starbucks Corp. that led investors to sell shares and analysts to criticize the company’s expansion plans.
In its quarterly report Thursday, Starbucks reported a 1 percent drop in traffic at U.S. stores open at least 13 months, the first such decline in the company’s history. Starbucks also offered fiscal first-quarter and full-year profit guidance below Wall Street estimates.
Starbucks shares fell $1.94, or 8 percent to $22.16 in midday trading Friday. The shares reached a 52-week low of $21.77 earlier in the day. The shares have traded between $22.57 and $40.01 during the past year.
Deutsche Bank analyst Marc Greenberg said in a note to investors the traffic decline may reflect increasing competition in the premium coffee market. McDonald’s Corp., for example, introduced a new premium coffee blend earlier this year that won accolades in taste tests. The fast food chain is now rolling out a line of espresso-based drinks.
“Starbucks is not imagining the bad guys are coming to get them…they really are,” Greenberg said.
Greenberg also bemoaned the company’s aggressive expansion plans. Critics have said the chain is oversaturating its markets.
The company seemed to respond to some of those concerns, saying it would open 100 fewer U.S. stores in fiscal 2008 than it had originally planned.
But it didn’t change its long-term goal of operating 40,000 stores worldwide.
“Apparently the memo that growth may be hurting current store (same-store sales) did not go out,” Greenberg said.
Same-store sales, or sales at locations open at least 13 months, is a key indicator of retailer and restaurant performance since it measures growth at existing locations than newly opened ones.
Elsewhere, Robert W. Baird analyst David Tarantino downgraded Starbucks to “Neutral” from “Outperform,” …