Starbucks (SBUX) is not going to realize its dream of having 40,000 stores. You read it here first.
But, the market isn’t buying it. Starbucks shares are down over 20% in the last year. Its share buy-back does not seem to be working there. And, the stock price underlines one thing above all else. Wall St. does not believe that the company can keep growing so fast.
24/7 Wall St. has been out surveying the conditions at Starbucks stores. We have taken a close look at about two dozen in the San Diego, Seattle, Houston, and New York areas. Those doing the surveys have also been in hundreds of Starbucks over the last few years in place as far away as Beijing, Tokyo, and London.
Forget about competition from McDonald’s (MCD) and Dunkin Donuts, both of which want a piece of the Starbucks market shares. Even if the two food retailers were not trying to get into the premium coffee business, there are several things that are going to turn Starbucks customers away.
First, the number of dirty stores we encountered was relatively large. We looked at one in Wilton, CT over the weekend. The trash cans were overflowing. There was trash on the ground in the outdoor seating area. There was food on the chairs, making having a seat a little risky. And, the help did not seem to care.
That is the bottom line of it. Across the stores we looked at, with few exceptions, the employees are doing the minimum. To double or triple a company’s retail outfits, the workforce has to want to do better.
I can remember in the 1980s when Sam Walton was still alive, I asked him how many stores he visited a year. The number was something like 700. He would fly in, usually in his own twin-engine plane with him at the controls, and have employee rallies at each location. He made the workers feel like they were part of the company. He got them fired up, And, he went on to the next location.
Starbucks is getting old. It looks old and its feels old. It looks like a success. And, sometimes it bothers the customers when a company acts too successful.
Douglas A. McIntyre can be reached at email@example.com. He does not own securities in companies that he writes about.