Business books have typically focused their view of Starbucks from the eyes of a marketer. GRANDE EXPECTATIONS: A Year in the Life of Starbucks’ Stock; however, presents Starbucks from the eyes of an investor.
The author, Karen Blumenthal, has spent years on the investment beat as a journalist for the Wall Street Journal. She uses her unique perspective to tell the story of the Starbucks business from the perspective of the investment community. This shift in view makes for an interesting read.
Karen’s well-written Starbucks story begins on the first day of trading in 2005 where Starbucks stock closed down a $1 to $61.14. Along the way she goes deep into explaining P/E ratios, buybacks, and earnings analysis in such a way creative marketers like me can understand.
One of the more fascinating angles in the book is the explanation of how the same-store-sales measurement came into vogue. Karen introduces us to Jerry Gallagher, who as a retail stock analyst in 1970s, wondered how much a company’s sales came from new stores versus existing stores. Gallagher developed "… his own method for sorting out how existing stores were faring without the obvious benefit from brand-new stores.” Today, the same-store-sales measurement is widely used as a way to gauge the health of a retail business.
Since 1992, Starbucks has recorded annual same-store-sales growth of 5.0% or greater. To continuously goose same-store-sales, Starbucks regularly introduces new, more indulgent and more expensive beverages like the Dulce de Leche Latte. The company also attempts to increase same-store-sales through selling music CDs and expanding its food offerings.
In GRANDE EXPECTATIONS, Karen outlines how Starbucks can increase its same-store-sales by a full percentage point if each store sold just two additional music CDs a day. Karen also explains how increasing lunch offerings (salads and sandwiches) at stores can contribute to yearly store-level sales increases of $30,000, resulting in driving up company-wide same-store-sales figures.
GRANDE EXPECTATIONS is a quick read that Starbucks junkies, like me, will learn something new from.
Shouldn't the title of the book be "Venti Expectations"?
I know, I know... always an editor...
Posted by: Ann Handley | April 05, 2007 at 05:44 PM