The Starbucks/Mercedes Economy

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Some people around the world are doing very well financially. Starbucks (NASDAQ: SBUX) is selling a record number of $5 coffee drinks. Daimler’s results were unexpectedly strong as Mercedes sales were better than expected. Maybe the 1% have increased spending more than expected, or the 5% have become bolder consumers.

Bloomberg reports that Mercedes revenues rose 9% to 27.01 billion euros and the company sold 9% more vehicles worldwide than in the same quarter a year ago. A 502,086 car sales figure may seem modest until the prices of Mercedes vehicles are taken into account. And the earnings data come just as few weeks after BMW announced equally strong earnings.

The home market for BMW and Mercedes is Europe. Sales for almost all car brands are down there. That means sales in the United States and China, mostly, have to more than offset them. The highest earners in the People’s Republic and America have enough consumer confidence to spend $50,000 to $100,000 for a new car.

Starbucks profits were up 19% to $309.9 million as revenue rose 15% to $3.2 billion. Traffic to same-store sales was up 8% for the quarter. Starbucks opened it 3,000th store in Asia. Not unlike for Mercedes and BMW, the American and Chinese markets were crucial to both numbers.

Luxury car companies and high-end restaurants were both flattened by the recession. Now each appears to have rebounded faster than the rest of the economy. Someone has money to spend, and those someones must be affluent.

Douglas A. McIntyre