Starbucks Changes Aim To Perk Up Profits
Hyperactive efforts byStarbucks to restore the appeal of its brand in the face of increased competition from fast-food restaurants likeMcDonald's ( MCD - news -people ) aren't likely to significantly materialize until the U.S. economy improves. Changes have been brewing at Starbucks ( SBUX - news -people ) ever since it realized that rampant expansion was having dilutive effect on its brand. The company's renewed focus on its in-store experience and efforts to increase healthy food options in its pastry cases came as quick-service restaurants expanded their beverage offerings to better compete with Starbucks' gourmet roasts and frozen drinks.Investors will be eager to see whether new initiatives have translated into growth growth for the company and while several analysts suspect that the company is headed in the right direction, economic conditions have made it difficult for most consumers to justify spending on anything but the essentials. Even once the economy begins to turn around, analysts question whether consumers will return to old spending habits that helped Starbucks' pricey drinks become best-sellers. A day ahead of the company's third-quarter earnings report, UBS analyst David Palmer raised his third-quarter earnings estimate to 21 cents a share from 19 cents on benefits from closing underperforming stores, reduced corporate expenses and lower dairy costs. Analysts polled by Thomson Reuters have been anticipating a profit of 19 cents on sales of $2.4 billion. In late June, Robert W. Baird analyst David Tarantino upgraded Starbucks to "outperform," from "neutral" and increased his third-quarter estimate by 2 cents to 20 cents a share. "Starbucks has been taking appropriate steps to enhance long-term fundamentals by slowing growth, controlling costs and investing in traffic-driving initiatives. The transition to positive operating metrics is likely to be gradual, but we think consistent signs of progress in upcoming quarters would increase investor confidence in the longer-term outlook," Tarantino said. link.....The coffee company has been trying to win back customers by renewing its focus on its in-store experience.
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