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TMFBent (99.85)

Someone Get Americans a Math Class Please...

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July 09, 2008 – Comments (12)

This just plain strikes me as funny, and indicative of the woeful state of U.S. math and logic skills. Or maybe it's more of an indictment of the sad state of priorities of us, our media, or both.

But at most of the company's 11,000 U.S. locations, patrons and workers have spent the past week trying to figure out if their store is getting the ax. Baristas say they field questions daily, and at least one blog has sprung up to collect a list of sites rumored to be closing.

If Starbucks is closing 500 of 11,000 U.S. locations, that's fewer than 5%, or worse than a 1 in 20 chance that your nearby Starbucks will be closing, folks. (Unless I need the remedial math courses I'm trying to foist on others...)

And with bubble-economy disaster-areas like California and Florida getting most of the closures, the real odds for regular Starbucks' being closed are even lower than that.

Here's a hint: If your favorite Starbucks is a mostly-deserted outpost at the intersection of Foreclosure Street and McMansion Avenue, you might want to start making coffee at home. If not, relax and enjoy the coffee.

Sj

12 Comments – Post Your Own

#1) On July 09, 2008 at 10:11 AM, capsoregime (77.17) wrote:

If your favorite Coffee place is a Starbucks, you may want to make coffee at home no matter what!  For the price of Starbucks, you can get nice, fresh Kona coffee straight from Hawaii. 

 /former Starbucks drinker who now drinks the best coffee on earth daily

 

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#2) On July 09, 2008 at 10:38 AM, alstry (35.45) wrote:

Actually it is 600 stores.  And your analysis misses the true math issue.  Two months ago it was 100 hundred stores.  The number was increased by 500 units to 600 stores.

Conditions deteriorated so much in a few months to increase closures by 500%?  That is about a $300 million dollar adjustment.  If the current trend continues, in a few months it could be 2500 stores and then a few months later 12,500 stores.

Whoops, I guess it can't be 12,500 stores.

It is easy to live in the present and bury one's head in the sand.....money is made by seeing where the puck is going.

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#3) On July 09, 2008 at 10:43 AM, alstry (35.45) wrote:

Actually it is 600 stores.  And your analysis misses the true math issue.  Two months ago it was 100 hundred stores.  The number was increased by 500 units to 600 stores.

Conditions deteriorated so much in a few months to increase closures by 500%?  That is about a $300 million dollar adjustment.  If the current trend continues, in a few months it could be 2500 stores and then a few months later 12,500 stores.

Whoops, I guess it can't be 12,500 stores.

It is easy to live in the present and bury one's head in the sand.....money is made by seeing where the puck is going.

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#4) On July 09, 2008 at 10:54 AM, GNUBEE (24.84) wrote:

Hey 75% of us don't need a math class, 25% do, and the other 36% might need some help :)

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#5) On July 09, 2008 at 11:11 AM, hansthered0 (< 20) wrote:

werd up al

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#6) On July 09, 2008 at 11:36 AM, GNUBEE (24.84) wrote:

Hey 75% of us don't need a math class, 25% do, and the other 36% might need some help :)

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#7) On July 09, 2008 at 1:05 PM, TMFBent (99.85) wrote:

Come on, Alstry, you know it's bogus to try and pretend that 600 is a big difference from 100 as far as closures go, especially from an enormous worldwide base. (Also very misleading to call a 4 percentage point increase in the number of store closings a 500% increase... If they had only planned to close ten and moved it to 200, would you think it's fair to call that a 1,900% increase in the number of store closings?)

But hey, if you want to look for the biggest pullback number to support a sky-is-falling thesis, you should dig even deeper. On that front, the real news was the dwindling number of openings, something that's long overdue. (Those are 4-figure numbers, and make for much more impressive scarin. I bet you could make it look like a 2,000% difference if you play with them a while.)

I'm as bearish on the near-term economy as the next guy, but your analysis presumes that some recent deterioration caused the change of plan. There are a dozen presumptions baked into that presumption. The biggest one is that the stores currently on the chopping block were a good idea in the first place. I would strongly disagree, and believe that a contraction for SBUX is long overdue.

Past CEO was trying to deliver top line growth and SSS at the expense of earnings quality. Howard realizes that's not going to cut it. I'm sure internal "hurdle rates" for store openings and stores remaining open are much higher than they were a year or two back. In other words, a change of mind is more than enough reason to engage in this kind of operation. It doesn't take armageddon, as you are suggesting.

I'm pretty sure you've got your chicken before your egg, or vice-versa. And the bottom line is... what? This is more evidence that we're all headed for heck in a handbasket? Come on. We can do better than that!

How about we take positions on whether or not this cleanup at Starbucks is a prudent, long-term value-adding proposition or, as your comments seem to indicate, a desperate attempt to avoid financial disaster.

I'll bet you a month's worth of lattes that SBUX crushes the total market return over the next 5 years. I'm talking by 10 percentage points or more. If not, lemme know, and I'll send you a loaded SBUX card.

With a firm handshake,

Sj

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#8) On July 09, 2008 at 1:31 PM, alstry (35.45) wrote:

How about we make the bet whether SBUX is bankrupt in 12 months.  I said bankrupt, not gone....two very different ends.

Remember, Boston Chicken is still around...it's just the original shareholdrs are gone.

You have a handshake:)

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#9) On July 09, 2008 at 1:34 PM, alstry (35.45) wrote:

By the way, since it is illegal to bet online....let's make it a gentleman's bet and when we sit down together, winner buys the latte for the other.

I look forward to buying you an extra large double mocha machiato latte or whatever.....

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#10) On July 09, 2008 at 5:20 PM, TMFBent (99.85) wrote:

I'm pretty sure it's still legal to bet online. You just have to shove the right thing through the tubes. I think Coffee is like a horse or powerball.

Bankrupt? That's too easy, but you're on. No way they're bankrupt and the equity's gone.

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#11) On July 09, 2008 at 5:24 PM, alstry (35.45) wrote:

Here is to the 2500 hundred store closing announcement coming up......then if trend continues....just one more announcement before I'll be buying.

I assume you are in D.C......I am out there often....I will pay for the plane ticket as well.

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#12) On July 10, 2008 at 1:35 PM, PebbledShore (93.73) wrote:

Bankrupt in 12 months?

Please.  Starbucks is a cash cow and they're still making a decent profit.

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