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06-06-2007, 09:16 AM
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#1
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Full time employment: Posting here.
Join Date: Apr 2006
Posts: 897
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Starbucks cheap?
Starbucks? It's trading near a 52 week low, but the PE is still pretty high (35).
Relative to other similar businesses, like "Peet's Coffee & Tea", the PE is low.
Lots of other things to consider, but is anyone seeing what I'm seeing (or not seeing?). Profit is off 1% in Q1 vs. 2006 avg., and it seems like SBUX may be losing their way (managment is selling other crap, besides coffee, like CDs, etc.)
I don't plan on buying any shares other than what's in Vanguard's Total Stock Market Fund, just throwing it out there for a talking point.
-CC
__________________
"There's those thinkin' more or less, less is more, but if less is more, how you keepin' score?
It means for every point you make, your level drops. Kinda like you're startin' from the top..." "Society" - Eddie Vedder
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06-06-2007, 09:30 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Not really my cup of tea, but I guess if you buy the stock you are pretty much betting on two things to sustain growth: international expansion, and the ability of management to use the "store experience" to sell more and more non-coffee items.
International expansion seems believable. I dunno about the pushing of other crap through the stores.
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"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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06-06-2007, 09:31 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2003
Location: Hooverville
Posts: 22,983
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Quote:
Originally Posted by CCdaCE
... and it seems like SBUX may be losing their way (managment is selling other crap, besides coffee, etc.)
-CC
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I haven't looked at Starbucks, but the point you make about selling other things is not necesarily a negative. As long as they don't significantly take on overhead for this broadened set of goods, it will mostly all flow to the bottom line.
By now, many Starbuck's stores have a competitor within a block or so, so it may be that raising the price of coffee is not as easy as it once was.
Look at the gasoline retail business- sales at the pump keep the store open, cigarettes and Cokes provide the profit.
ha
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06-06-2007, 09:32 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Quote:
Originally Posted by haha
Look at the gasoline retail business- sales at the pump keep the store open, cigarettes and Cokes provide the profit.
ha
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The analogy suits me, especially as I generally find their coffee about as palatable as gasoline.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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06-06-2007, 09:48 AM
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#5
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Recycles dryer sheets
Join Date: May 2006
Posts: 230
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When I think of SBUX (11,000 stores) I think of MCD (33,000 stores). Can there be as many SBUX as MCDs?
The stock is not my cup of tea since it's a high flyer at 30x earnings, it pays no dividend, the cash flow is "worse" than the earnings b/c they are still spending so much to build more stores . . . but if I had more of a growth investing philosophy I'd be interested.
I don't drink coffee at all and I've never set foot in one of their stores, but I don't see why there can't be as many SBUX as MCDs since it's still food and drink service. And since SBUX appears to be more of a lifestyle trend, it's easier for them to sell merchandise, I suppose. As a non-customer, it's hard to me imagine walking into a coffeeshop and buying CDs and mugs since I have a hard time fathoming that at MCDs, but obviously they have a different setting and customer.
In glancing at their financials I was impressed that their long term debt is so low given how fast they have been building the chain.
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06-07-2007, 08:55 PM
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#6
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Recycles dryer sheets
Join Date: May 2007
Posts: 290
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Quote:
Originally Posted by brewer12345
Not really my cup of tea, but I guess if you buy the stock you are pretty much betting on two things to sustain growth: international expansion, and the ability of management to use the "store experience" to sell more and more non-coffee items.
International expansion seems believable. I dunno about the pushing of other crap through the stores.
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Don't know where else they are expanding to, but they may be reaching saturation in Japan. There are already 2 of them in my rinky-dink town, which is the same number we have each of McDonald's and Kentucky Fried Chicken. (And is also 2 more than we needed, as far as I am concerned. A Peet's might have been nice, but oh well.)
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