Starbucks Case Analysis

Economic conditions in the US and certain international markets could adversely affect Starbucks’ business and

Factors and trends that made a significant contribution to Big Blue’s profitability can include revenues, cash flow, gross margins and earnings per share (EPS). When discussing the company’s revenue growth, we can see that the company’s lowest point in their first fiscal quarter in 1997 was at $17,308,000.00. Afterwards, the firm’s

And in recent years and there have been a number of problems that Starbucks has had in Australia. Due to the record petrol prices and interest rates around the world, Starbucks company earnings have declined dramatically. As much of the world is having monetary problems, consumers have had to pull back from the consumption of many luxury goods. In the past two years in Australia, sales fell to 50% and the profits dropped 28%. There have been many actions taken by the owners of Starbucks to try and help to rectify the problems that it has been having. Some of these rectifications have been to shut down every store in America at the same time for 3 and ½ hours to help a train their staff to be better a customer service. A few more rectifications have been to add more food varieties into the Starbucks Stores and also the launch of Starbucks discount cards the ‘Starbucks Express’ and also providing high speed Wy-Fi connection for the consumers to use while drinking their coffee. There have been many people who have said that during the massive growth of Starbucks around the world, they begin to focus more on expansion than on customer

I think that the company incurred a loss of 1.3 Million for the year 1995 (attached excel sheet that shows my calculations). The reasons that could have led to this lost were:

Starbucks is going to continue losses unless they come up with a new marketing strategy to promote their products. There could be

coffee in the world. The goal of Starbucks is to establish the company as the premier purveyor of the finest coffee in the world while maintaining the organization’s uncompromising principles. In addition, Starbucks wants to develop its brand beyond being the preferred outlet from which to purchase coffee to becoming the preferred consumer brand.

Since January 2008, Starbucks has taken steps to address the deterioration in the US retail environment revitalize its global support structure. These steps have been designed to structure the company’s business for long-term profitable growth. Because of the continued weak economy and decreased customer traffic, as well as the cost associated with the store closures and other actions in its transformation strategy, the company’s fiscal 2008 results were impacted negatively in the following ways:

In order to cut overhead costs Starbucks merged with other retail locations, such as Costco, Target, Omni hotel, and resorts, and online at amazon.com. Even though Starbucks expands globally one of the major risks because of the recession, was increasing coffee prices. Starbucks faces many other challenges, such as lower wages with employees, and frustrated store managers. Coffee is the main source of why they call it Starbucks. The major focus is the quality of improving their coffee and customer service instead of raising their prices on coffee.

Starbucks’ shares have grown more than 1500% over the past decade. Financially, it has been an oak tree in an ever changing economy with customers that have ever changing demands. However, there has been increased concern for the financial viability of the coffee shop a recently announced plan to close down over 600 stores that were said to be underperforming domestically. That means that more than 1,000 jobs will be eliminated. As scary as that is on the local front to top management, the executive staff feels that it is the only way to recover from it’s shocking $108.7M loss for the 2nd quarter this fiscal year.

2010 with an average profit margin of 3.5%. Almost half of segment revenues went to large national

In general the coffeehouse industry in the United States was experiencing an increase in coffee consumption per capita due to the “Starbucks effect”. At this time Starbucks was operating approximately 20,000 stores in the United States and was living a fast expansion strategy worldwide.

The child of post war America era is resigning. This implies spending by more established shoppers will diminish. Presently, Starbucks will need to tap the Gen X and the Millennials as clients.

Starbuck’s strategy focused on three components; high-quality coffee, intimate service, and ambient atmosphere. Starbucks worked closely with growers in Africa, South and Central America, and Asia-Pacific regions to insure the quality of its product. Starbucks called all employees' "partners" and worked hard to train them with the skills necessary to best serve the customer. The atmosphere at Starbucks was crafted after the European-style espresso bar. The company goal was to create ambience through the Starbucks "experience" and by making the area comfortable, yet upscale.

Nevertheless, Starbucks’ stock price has had its downfalls in the past five years. Around July 29th, 2012, the company’s stock had a significant dip. According to CNN Money, although the company did significantly well in the months prior, it failed to match its predictions due to global economic conditions, more specifically, its increasing efforts to expand in Europe. Therefore, many investors began to mistrust the company due to the small margin of error in its prediction. Furthermore, in 2007, Starbucks Corp. made yet another mistake. After a rapid expansion and significant growth during the previous year, the company’s stock fell by 42% that year. The underlying reason being that in opening new stores, Starbucks lost its identity. It became more of a standard grab-and-go coffee shop than a unique coffee experience. Therefore, many customers felt unsatisfied and the company ultimately had a decrease in sales. However, it is important to note that the dip in stock price was generated by more than just the

Earnings before income taxes also increased from $3,903.00 to $4,198.60, an increase of 8%. Both net earnings including noncontrolling interests and net earning attributable to Starbucks saw a small percentage increase at 2%. Examining the vertical analysis of the income statement, one can see that all three net revenue categories – company-operated stores (79%), licensed stores (10%), and CPG (11%) – have the same percentage from both years. Similar to net revenues, the 2016 expenses and net earnings have very similar percentages to those of 2015.