Starbucks (SBUX)

[HenryTo]

SBUX is getting dangerously close to breaking its 200 DMA at $50.23 - which it hasn't done in over two years:

http://stockcharts.com/gallery/?sbux

Latest news on Starbucks' expansion plans:

http://yahoo.reuters.com/financeQuoteCompanyNewsArticle.jhtml?duid=mtfh80583_2005-03-16_18-26-04_n15653188_newsml

[HenryTo]

A marketwatch.com interview with the new CEO of Starbucks - which we rated as a buy on May 4th with the price at around $50:

http://www.marketthoughts.com/forum/viewtopic.php?t=365
----------------------------------------------------------------------------------

Starbucks' CEO: Greatest growth ahead
Donald relates mystery of the coffee bean, eyes China
By Jennifer Waters, MarketWatch
Last Update: 10:25 AM ET May 30, 2005


CHICAGO (MarketWatch) -- Jim Donald walked around the Starbucks at Rush and Oak streets in the heart of Chicago's Gold Coast neighborhood last week as if he owned the place, chatting it up with customers, ringing up orders and even handing out freebies.

The customers hardly seemed to notice, but Starbucks Corp. (SBUX: news, chart, profile) employees were tripping over themselves to get in on the experience. It was their first time meeting Donald, the guy who spent 21/2 years in training before taking the helm of the nation's largest coffee retailer two months ago.

Donald took the chief executive reins from Orin Smith on March 31, becoming only the third man in the post since Chairman Howard Schultz bought the Starbucks assets in 1987.

Donald, whose grocery-store background includes launching food products at Wal-Mart Stores Inc. (WMT: news, chart, profile) , was recruited by Schultz over a four-month period, a courtship initiated through a mutual friend.

Donald started at Starbucks in late 2002, about the time that Howard Behar retired for the second time after serving a 15-month stint as chief executive. That broke up the successful "H2O" team -- reference to Howard Schultz, Howard Behar and Orin Smith.

But Donald said it's taken him all that time to get Starbucks directors and managers -- they're called "partners" -- to get past the retirements of Smith and Behar and get comfortable with him.

"I'll never forget this," he said. "A long-time partner says, 'Look, you've taken over for Howard Behar ... and now you're moving Orin Smith out. Is Howard Schultz next?'

"I said, wait a minute, you think it's easy coming in taking over for Howard Behar and Orin Smith? Everybody loves these guys. So for 21/2 years I was just out in the field meeting and greeting and learning how they run their business," Donald said.

He also was running operations in North America as president, at a time when the company's net income surged 82% to $390.6 million last year as worldwide sales rose 61% to $5.29 billion.

Donald chatted about the job, the company and his fascination with bean picking with MarketWatch during an informal coffee-tasting.

Donald: Look at this bean. In the beginning this thing is a red bright cherry and it's surrounded by a fruit covering that protects that cherry. It goes through a washing process to dehole the cherry to get to that coffee bean. That coffee bean is washed and it's dried and then it's roasted. But before it's roasted, it has to go through our specifications.

More than 4.4 billion coffee cherries were picked last year. I got to pick in Costa Rica in February and it's such an art. I screwed it up big time. I had green coffee cherries and (the pickers) were yelling at me. Their fingers have these zones and they know just by touching which are the green ones to pass by. It was cool. When you drink coffee now, think about the hand-picked coffee cherries.

MW: Starbucks has been producing strong comparable-store sales month after month. When do comps slow down?

Donald: We have said continually that our comps will (grow) in the range of 3% to 7%. We have exceeded that pretty consistently for over a year and a half. We can't say when they'll slow down, nor do we budget for them to slow down. We always look at them in the 3% to 7% range -- that's a very healthy range.

We're going to continue with what we have been doing. The past 2 1/2 years have been a good growth story for us. Grow big, stay small. That is the mantra we use.

But we will continue to look to new markets that we're not in both domestically and international. We'll focus on key countries outside of the U.S.

China is one. We feel that China will be our largest market outside of the U.S. We have around 300 stores in all in China and clearly there can be lots more than that, but we haven't really put a number to them yet because we don't know what the upside is.

We look at large countries, such as India or Brazil or Russia -- there aren't stores in any of them. We'll probably use food service going into Russia with just the brands (in supermarkets).

We've said that we're going to grow sales by 20% and earnings by 20% to 25% in the next three to five years.

Of all the things that we're doing -- let's say there are 100 things -- we want to keep executing 1% better on each of them and continue our growth model, but it will be driven primarily by new-store growth over the next three to five years.

MW: Is it true the company won't be happy until there's a Starbucks in everyone's living room? (There are 9,373 Starbucks stores worldwide and the company recently upped its store-count goal to 30,000.)

Donald: We will get into your living room because that bag of Gold Coast coffee will travel there from your kitchen. Coffee at home is a big push for us. We're in over 21,000 supermarkets today with Starbucks and Seattle's Best. We want you to capture that experience of a Starbucks location in your kitchen.

MW: I don't have this kind of store environment in my home and sometimes my environment at home isn't exactly always ideal for enjoying a Starbucks experience.

Donald: What you learn today (about coffee and bean picking) is the knowledge that we want to impart on all of our customers. You will think about coffee in a different way, if only for 30 seconds. You'll have that experience. Now everything else will come cascading down as you start your normal day and everything becomes frenetic, but you will have had the experience.

MW: People complain that the service is slow, that they have to wait in long lines. Obviously that's more likely to occur during, say, the morning rush, but what do you do to speed things up?

Donald: How often do we talk about speed with service, not speed of service? We talk about it every day. Three minutes. It's not going to be that everywhere, but that is our goal.

To get there, we've gone to automated espresso machines, automated cold-beverage stations where we make the Frappuccinos. We're deploying people where they're needed. Whether it's the pastry case, whether it's on the register, whether it's brewing coffee -- it's like poetry in motion.

Does it happen in every store? No, but as rule we have an average three-minute goal. We're just north of that now, but we'll get there.

I know there will be bad-service moments. We all have them. But we react just as positively to get that corrected as we do for the good service.

MW: The experience of walking into the stores and immediately smelling coffee, I know, is very deliberate. But when you start bringing food into all the stores, what happens to that experience?

Donald: That's why we're only in Seattle and Washington, D.C. right now. We caught that in the test market that there was an aroma of a warm savory sandwich. We stopped the test and went through a very, very deliberate process of buying the convection/microwave oven that doesn't send the smells into the air. We've got it and now you don't get that smell into the stores.

We would never actually make food in the stores. We'll always have it made and brought in. The sandwiches are made fresh and we're getting daily delivery and a high-quality sandwich. Nothing has been skimped on.

MW: What is the coolest thing about your job?

Donald: Right here, in this store. If I could spend every day in the field it would be great. It just doesn't get any better than this.

And when you sit around a table like this with the store manager, the district manager and store managers-to-be, this is the future of our company. And the enthusiasm in the 9,300 stores that we have now is just in the beginning stages.

We are truly in the very, very early stages of our growth. We've said we think there's room for 30,000 stores worldwide. We're just in the first couple of innings.


Jennifer Waters is the Chicago bureau chief for MarketWatch.

[HenryTo]

SBUX up 2.5% in after-hours trading as I am typing this. Company raised fiscal 2005 earnings guidance by two cents a share:
---------------------------------------------------------

Price hikes, expansion drive Starbucks
By William Spain, MarketWatch
Last Update: 6:01 PM ET April 27, 2005

CHICAGO (MarketWatch) -- Expansion, price increase and a bump in same-store sales drove Starbucks fiscal second quarter sales up 22% -- and helped fuel an even faster bottom-line gain.

After the bell Wednesday, Starbucks (SBUX: news, chart, profile) said it earned $101 million, or 24 cents a share in its fiscal second quarter. That is an increase of 27% over the year-ago figures of $79 million, or 19 cents, and in line with average estimate of analysts polled by Thomson First Call.

Revenue rose to $1.5 billion as the company opened 669 new company-operated retail stores over the last 12 months and grew same-store sales at a 7% clip in the quarter. Four percent of the latter increase came from more transactions and 3% from the average value per transaction as beverage price increases took hold.

Starbucks said that it still expects open about 1,500 new stores worldwide in fiscal 2005, with more than 1,000 debuting here in the U.S. It's targeting revenue growth of at least 20% for the year, excluding the impact of a 53rd week in 2004.

Further, it raised its earnings target range to $1.17 to $1.19 a share for fiscal 2005, excluding the impact from expensing stock options. That is 2 cents over a previous range of $1.15 to $1.17 per share.

Chief Financial Officer Michael Casey said in an interview that the company expects some commodity price pressures will ease this year.

Dairy products -- the company is an enormous buyer of milk and cream -- should be significantly lower, he said, removing some of the weight of big jumps in the third and fourth quarters of 2004.

"We are not expecting it to spike. Going forward, we should have some favorable comparisons in dairy [costs]," Casey said.

Shares of Starbucks, which finished the regular session with a loss of 20 cents at $46.41, popped about 2.4% higher to $46.41 in after-hours trading.

[HenryTo]

Keep an eye on SBUX tonight. They are due to report earnings after the bell!

SBUX is one of the "must-watch" brand names that I have on my list. If SBUX doesn't give good guidance up ahead, then it signals that consumers are really clamping down.

Actually, you know what? I didn't go to get my daily fix of SBUX last night. Gas prices are high (you have to take your car to get anywhere in Houston) and for some reason, I just didn't want to spend an extra $4 on coffee yesterday. I ended up working at home instead.

[HenryTo]

I really like Starbucks as a company but I still don't think I like the stock right now despite it coming down from a high of over $62 share in late December of last year. I think the economy is slowing down and Starbucks will also go down with it - despite their customer loyalty and brand name.
---------------------------------------------------------------

Starbucks loaded with value: analyst

By Jennifer Waters, MarketWatch
Last Update: 5:57 PM ET April 25, 2005

CHICAGO (MarketWatch) -- Shares of Starbucks Corp. clocked their biggest one-day gains Monday since December after an analyst said the stock was undervalued by at least 25%.

Prudential Equity Group analyst Larry Miller said "predictable" 20% to 25% earnings growth over the next three to five years and "very few fundamental concerns" underscore a ratings lift to overweight from neutral. He set his 12-month price target at $58.

Starbucks (SBUX: news, chart, profile) shares jumped as much as 5% in early trading before easing somewhat to close at $47.45, up $1.89.

At $58, that represents a price-to-earnings multiple of 40 times. At Friday's close of $45.56, the P/E multiple stood at 31 times earnings -- nearly double the next highest among the other eight major restaurant chains he covers.

"Could Starbucks be a compelling value at 31 times fiscal 2006 earnings?" Miller wondered. "Yes, on a relative basis, it looks that way. Starbucks is growing earnings 175% faster than the average stock we cover; yet the shares only trade at a 7% premium to its average."

Indeed, Starbucks shares have dropped 29% since hitting a high of $62.26 in late December. Investors have backed away as sales have slowed from robust double-digit monthly gains to the high single digits. Having grown used to Starbucks consistently beating its own forecasts for sales at stores open longer than a year, investors whack the stock when same-store sales meet expectations.

"The sell-off in the shares may be overdone, as mid-single digit comparable-store sales are still very respectable," Miller wrote in a note to clients. What's more, he said that Starbucks has never delivered same-store sales -- an important industry measure -- that were less than 5% in any given year of its public history. Monthly comparable-store ranges during some of those periods ranged from 1% to 13%.

Miller stands by a long-term growth rate of 25% -- easily outpacing other restaurant chains such as McDonald's Corp. (MCD: news, chart, profile) at 10%, Yum Brands Inc. (YUM: news, chart, profile) with 12% and Rare Hospitality International (RARE: news, chart, profile) at 19%.

He also gives short shrift to competitive moves such as McDonald's latest efforts to come out with premium coffee drinks such as espresso and cappuccino. McDonald's also is improving the taste of its drip coffees with what it has called a more "savory and exclusive blend."

"We've tried McDonald's new coffee and believe the flavor's not likely to appeal to core Starbucks users," Miller said.

He also urged investors to buy on the strength of the company's new products, 3% price hikes and operational improvements.

"The recent sell-off in shares has created an opportunity to own one of the best large-cap retail growth stores out there," the analyst added.

[HenryTo]

SBUX still slip-sliding away.

From Briefing.com

2:46PM Starbucks - - Relative Weakness (SBUX) 46.00 -1.00: -Technical- The stock displays relative weakness as it continues to slide lower intraday to fresh 6-month lows.

[HenryTo]

SBUX again lower today - down about 3% as I am typing this. Definitely a stock to watch going forward.

[HenryTo]

Starbucks just closed decisively below its 200 DMA yesterday - something it hasn't done for over two years:

http://stockcharts.com/gallery/?sbux

P/E ratio still too rich for me here even though I really like their shops and their products. I think a P/E of around 30 is more reasonable - compared to one that is over 45 today.

[HenryTo]

Starbucks just slipped below its 200 DMA in this morning's trading based on this news item. Pretty important here since it hasn't done this since the March 2003 low! Stay tuned...

---------------------------------------------------------
Starbucks March Sales Below Estimates
Wednesday April 6, 6:00 pm ET


LOS ANGELES (Reuters) - Starbucks Corp. (NasdaqNM:SBUX - News) on Wednesday reported a less-than-expected 6 percent rise in March same-store sales due in part to a shift in the timing of its annual sale of coffee brewing equipment.

The coffee shop chain's shares fell 1.8 percent in after-hours trading following the announcement, which came after the close of regular trading.

Three Wall Street analysts' estimates for same-store sales, which tracks sales at Starbucks coffee shops open at least 13 months, had ranged from a rise of 7 percent to a rise of between 8 and 9 percent, according to research reports.

The results, however, were in line with Starbucks' long-term goal of posting monthly same-store sales increases of between 3 percent and 7 percent -- a target the company has a track record of beating.

Chief executive Jim Donald said that while sales of espresso drinks and food had helped drive sales during the period, that strength was somewhat offset by a change in the timing of Starbucks' sale of brewing equipment.

The annual sale, which ends April 12, overlapped with this year's March period for 12 days compared with 23 days in the same period last year, Starbucks said.

Starbucks' monthly sales reports typically spark volatility in the company's shares. Last month, the company's results for February exceeded Wall Street expectations, triggering a more than 2 percent rise in its stock following the announcement.

Starbucks shares fell 93 cents, or 1.8 percent, to $51.20 on the Inet electronic brokerage from their Nasdaq close of $52.13.