Starbucks (Nasdaq: SBUX) has been
slashing its way to profit. In a sign that its turnaround
is turning out well, the company took nearly 30 stores off
its "death list" of slated closures.
The coffee giant's chief financial officer, Troy Alstead,
shared the glad tidings at the Goldman Sachs Global Retail
Conference. He said Starbucks has been able to improve the
profitability at those stores, and that they even started
contributing to the company's fortunes. Cost-saving
strategies included wasting less coffee and milk, tinkering
with employee scheduling so that it's more efficient, and
renegotiating rent for some of the stores.
Granted, we're talking about a miniscule number of cafes
compared to the nearly 1,000 locations Starbucks had planned
to close, but the survivors represent a glimmer of hope.
There is a solid argument that once Starbucks emerges from
these difficult times, it will be a much leaner, meaner
company operationally.
It'll need that edge, given the rivalry it faces not just
from close cafe rivals such as
Peet's (Nasdaq: PEET),
Caribou Coffee (Nasdaq: CBOU), and
mom-and-pop coffee shops, but also from fast food giant
McDonald's (NYSE: MCD). It's even under siege
from
Green Mountain Coffee Roasters (Nasdaq:
GMCR), which offers gourmet coffee and Keurig coffee makers
for people who sip their java at home.
These may be glad tidings for Starbucks, but I remain
cautiouslyoptimistic. I still worry that some of its
recent initiatives
could cost Starbucks its soul, as company founder Howard
Schultz has occasionally feared.
Our pollrevealed that a daunting 45% of Foolish
respondents already think Starbucks is no different from any
other corporation. And if the company gets too zealous about
cost-cutting, the brand could die
the death of a thousand cuts.
For now, though, a reduction in the store death list --
especially because of significantly improved profitability --
is a heartening sign of life for the coffee giant.
This article was originally published as
Starbucks' Surprising Store Survivorson
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