Starbuck's Woes

Above find one overgrown boarded-up Starbucks. This Southampton, NY location was only open for a perhaps a year before shuttering.

What happened? Don't the wealthiest people on planet Earth drink $4 lattes?

It's on a major road in a good, vibrant location next to the highest grossing 7-11 in the country....so what gives?

Anyways, this particular store is owned by *corporate* so the braintrust shareholders are on the hook for the entire ten year lease. Apparently the lease had no *re-let* provision; and in this economy it's unlikely the landlord will get a high enough offer from another concern that would induce him to let Starbucks out.

Even if s/he found someone willing to pay say three-quarters of what they're receiving now, and they figured that along with a *buyout* from Seattle, this owner would probably be safer collecting from Starbucks - lest his new tenant declare bankruptcy down the road.

Locally, a new Starbucks opened in my grocery store this year. I'll bet it wasn't open 3 months before it disappeared as well.

Altogether, I believe Starbucks has closed 900 stores in the past year or so - 70% of which were opened post-2006.

Now I'm not a wage slave (though some of my best friends are!) and I don't ever drink coffee, so I admit to knowing nothing about the coffee business. However I have seen that McDonalds and Dunkin Donuts in the Northeast have jumped headfirst into coffee products - and at a lower price point.

The problem with Starbucks, I suspect, is that there are no customers *trading down* to their offerings in this market a la McDonalds and Walmart. And that's a problem today for luxury goods in general.



When reality eventually descends upon the stock market....this one will most definitely see single digits again.