Macro Pressures Impact Starbucks

The ubiquitous Starbucks coffee chain saw a decline in visitors while its total revenue for the quarter was less than what analysts anticipated. Yet the chain’s stock has remained stable, even rising slightly, as the company reported 4% sales growth globally and 5% sales growth in the United States. Still the green goddess of coffee is tweaking her overall strategy. The Los Angeles Times reports that Starbucks is moving forward, but with caution, explaining that, “ongoing macro pressures [have] impact[ed] the retail and restaurant sectors.”

A lack of growth in foot traffic across locations is one of the pressures facing Starbucks. Surprisingly, low growth has not resulted in loss of sales. Instead customers are spending more at stores, at least at Starbucks. But the future is uncertain for other Starbucks-owned franchises. This is especially true in malls, where Starbucks is closing its 379 Teavana stores that were purchased in 2012. Cutting those stores will help the chain’s finances.

Other changes include buying back its shares of all Starbucks locations in East China. This gives Starbucks full control and ownership over that region. In Taiwan Starbucks is pursuing the opposite strategy. The company will sell 50 percent of its stock in that region allowing individual stores to be owner-operated.

Starbucks has remained tight-lipped regarding other pressures, such as trade agreements and their impact on product availability and consumer prices, wage increases and the overall political and international climate. However as uncertainty reigns in those areas, a cautious, long-term approach is pragmatic.

Starbucks’ financial wing is making precision cuts across the brand. This approach seems to be bulking up stakeholder confidence, as can be seen in the company’s stable stock prices. Other companies that grew exponentially over the past few decades could learn from Starbuck’s example, especially the hot companies of the 1990s and early aughts, that are finding themselves no longer in high-growth mode.

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