Dunkin’ Donuts appears to think it can join the ranks of all the other companies trying to take business from Starbucks (SBUX). McDonald’s (MCD) has been at the top of that list, and now they won’t be so lonely.

According to Reuters, Dunkin’ "gets around 65 percent of sales from beverages. Over the last few years, it has added espressos, lattes and cappuccinos that cost roughly $1 less than at Starbucks."

At some point the market for coffee will become so crowded that retail chains will have to give away the java and hope to sell breakfast food to bring in revenue.

Douglas A. McIntyre

Tully’s has been around since 1992 and it does have coffee shops in Washington, Oregon, Idaho, California, and Arizona.  It even has Japan operations.  Although the company had originally postponed its IPO on August 14, 2007, this is the official withdrawal and this one won’t be public for quite some time (if ever).

If you take a look at our own IPO INDEX on our site, you might fall under the impression that the only companies coming public in this environment are the former blank check IPO’s or the SPAC’s.

Jon C. Ogg
February 7, 2008

As of late morning after shares slid from being positive, it appears that options traders are looking for a move of up to $0.95 to $1.05 in either direction.  The only good news about the chart is that at least this one stabilized after hitting $18-ish levels before Schultz announced he would resume the helm.  Shares have traded in a $17.66 to $45.42 trading range over the last 52-weeks.

As estimates have been coming down, there are not near as many positives going in and it would be hard to imagine Wall Street demanding a solid quarter with bang up numbers.  Schultz has already made some announcements on what he will do to bring the growth under control and to keep the wheels on the car, but you can imagine investors will be weighing the strategy more than a past number.  Testing $1 coffee may be going the wrong way as it is "so early 1990’s.

Jon C. Ogg
January 30, 2008

Introducing 2008 targets: It sees same store sales of 3% to 7%, is targeting 18% revenue growth and targets 20% to 22% earnings growth.  Fiscal September-2008 looks like estimates are $1.06 EPS on revenues of $11.33 Billion.  That is in-line on earnings guidance but could be deemed a tad light on the revenue front depending on your mid-point of guidance and which estimate you use.  The good news is that this is not showing any newer fundamental flaws or major problems that would create real caution inside the company.  Shares are acting accordingly in initial reactions, and we’ll have to see how others interpretthose earnings and revenue growth ranges before declaring a formal vistory.

Starbucks opened a record 668 stores in the quarter as well and posted a comparable sales growth per store of 4%.  It still sees a total of 2,400 store openings this year and is now targeting 2,600 store openings in 2008.

Starbucks shares are up almost 4% in initial after-hours reactionary trading at $28.25.  If that level can hold, shares will be well above 10% off of the recent lows and may give investors a reason to think the worst has been seen or that most of the bad news has been priced in.  We’ll see if that holds, but that’s the initial reaction.

Jon C. Ogg
August 1, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

We already discussed how the company has a long way to go before itcan fix its woes.  Upon some store revisits it seems the company is trying, and we have already been given notice of some price hikes that are going to be passed on to yours truly and you.  The larger food initiative that is being rolled out on top of last year’s rollout is still in the infancy, so perhaps we’ll get a glimpse of the company’s thoughts there.  The company has been under pressure from McDonalds (NYSE:MCD) and faces other pressure from Dunkin and others.  Here was our list of suggestions in May for the company to follow after we did a series of store evaluations in various locations.

What is interesting is if we take this into the consumer-meets-investor mindset.  Last night Whole Foods (NASDAQ:WFMI) posted stronger than expected or not as weak of results, and shares are up big today as a result.  Sure these comapnies are in different segments, but what they have in common is a loyal client base AND large earnings and valuation multiples compared to their competitors.  A 30+ P/E ratio used to be a 40+ P/E ratio for the longest time.  The question is what P/E multiple can victory be declared for a fair value.  We ran a piece wondering if shares had come close to a bottom at the end of June, and that is still an outstanding item. 

It’s quite possible that this multiple may need to compress further, but using the forward 2008 multiple it trades at an estimated 25.1 forward P/E.  Some will still deem this high if the market continues its weakness and volatility, but with earnings per share growth at more than 20% it becomes and argument over who will pay what for that growth.  If you wanted to use a ‘forward’  PEG ratio of 1.25 this becomes cheaper, with the flaw being that this is trying to fast-forward a year.  Based on that, this could still face more pressure as investors and traders fight over what the true value is.  But with the 52-week high of $40.00 and the curent $26.60 price it just looks and feels like the worst could be behind it.  One earnings warning or major hiccup will blow holes in that theory, and that always has to be kept in mind. 

Starbucks also saw its most recent short interest rise from 25.8 million shares in June to almost 27.4 million shares in July.  Options traders based on a static quote mid-day appear to be braced for a price move of just over 2.2% in either direction, although that is arguable with shares being stuck between strike prices.  The average analyst price target is still $35.00 or higher.

Jon C. Ogg
August 1, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.