Starbucks Suffers in a Bad Economy

Earlier this year, Starbucks announced the closing of almost six hundred stores in the United States. This was a move to trim back those outlets that were not meeting the company’s financial criteria. In the face of a poor economy, Starbucks is reporting more bad news:

“Starbucks reported weak quarterly earnings and slightly higher sales Monday, as American consumers cut back on the number of expensive coffee beverages they purchased.

In after-hours trading, shares of Starbucks fell 3%, after closing down 35 cents to $10.20 during the regular trading day. In the past year, the company’s shares have plunged more than 50%…”

link: A bitter brew for Starbucks

Starbucks has three obvious hurdles. There is the economic pressure on its customers, as well as increased competition from fast food outlets like McDonald’s. However, Starbucks may have to overcome its own street reputation as being a semi-elite, expensive coffee vendor. People are forced into watching their dollars and saving for essentials. Starbucks’ challenge is to change public perception and appear to be an affordable indulgence in a stressed economy.

Catherine Forsythe