How Many Stores Is Too Many For Starbucks?
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With nearly 14,300 U.S. locations — more than 2,000 of which have opened in the last three years — there are now more Starbucks locations in the country than McDonald's. The coffee company has also been expanding its Reserve Roasteries at a rapid clip.
Such growth might mean retail saturation for the chain, according to the Wall Street Journal, citing a number of industry analysts.
“The U.S. coffee market is becoming over-stored, and traffic is hard to come by," Quo Vadis Capital President John Zolidis told the Journal.
The idea isn't new. In February, Bernstein analyst Sara Senatore told Rueters that “excess unit growth, at a time when Starbucks is reaching a more mature stage of growth," is causing the chain's sluggishness.
Analysts aren't worried because sales are dropping, but because they aren't rising as fast as they once were. In April, the coffee giant reported that Americas and U.S. comp-store sales increased 2% compared with a year ago, about the same as the increase in global comp-store sales.
Fiscal Q2 included holiday traffic, which was flat. Two years ago, holiday sales scored a 9% gain, and during the 2014 holiday season, sales jumped 13%, which beat analysts' expectations.
Starbucks has warned investors recently that overall 2018 same-store sales growth would be at the low end of the company's forecast.
Even so, the company also had enough cash on hand to pay dividends and make share repurchases during Q2 to the tune of $2B.
Analysts worry that prices at Starbucks are too high. Maxim Group analyst Stephen Anderson told Reuters that Starbucks has raised prices about 3.5% each year in recent years, compared with about 1% per year for rival Dunkin' Donuts.
Just this month, Starbucks raised prices at nearly 8,000 U.S. locations by 10 cents to 20 cents, Fortune reports. The company cites inflationary pressure as the reason.
Last year, the company raised brewed coffee prices by 10 cents to 20 cents on some sizes, and increased espresso prices 10 cents to 30 cents.