Starbucks (NASDAQ: SBUX) hosted its biennial Analyst Conference here today, updating the financial community on the company's plan to build and improve its business and operations in the face of current conditions. The company's plan includes increased store and operating efficiencies, additional cost reductions and delivering long-term growth.
Howard Schultz, Starbucks chairman, president and ceo, opened the conference by reaffirming the company's commitment to its core values and principles. He outlined an operating approach that includes maintaining the loyalty of core customers through continued innovation and rewards, raising the bar on operational excellence and taking an aggressive approach to cost savings.
"The entire retail sector is operating in a very tough economic environment. While Starbucks has not been immune to the decline in consumer confidence, we are fortunate to have a world-class brand and a loyal customer base," said Schultz. "In this environment it is critical to put our feet in the shoes of our customers."
Schultz commented further, "We generate strong cash flow, have solid liquidity and are executing rigorous cost-containment initiatives to improve our bottom line. Starbucks will continue to take actions to improve our U.S. business and take advantage of targeted growth opportunities in high potential markets. Integral to this are our efforts to elevate the Starbucks Experience and staying true to our core values. This focus will help us emerge stronger, more efficient and better able to deliver value to our shareholders over the long term."
Highlights of the other presentations included:
â€¢ CFO Troy Alstead shared further details about the role the economy is expected to play in fiscal year 2009 forecasts, including projected weakness during the holiday period, and the steps being taken to enhance profitability. Alstead outlined additional changes being made to the company's cost structure in order to position Starbucks to perform in the periods ahead; changes that are expected to result in an additional $200 million in savings for a total of more than $400 million in savings in fiscal 2009 alone.
â€¢ Michelle Gass, executive vice president, Marketing and Category, and Terry Davenport, chief marketing officer, outlined initiatives to enhance Starbucks brand relevance for all consumers. They also discussed the success of new value-based initiatives, including the Starbucks Gold Card, and the encouraging results of recent opportunistic marketing programs. They elaborated on customer feedback that has helped put value, health and wellness and social responsibility at the forefront of innovations, and on significant gains in brand perception measurements over the past six months.
â€¢ Cliff Burrows, president, Starbucks Coffee U.S., reviewed specific actions being taken to address performance-driving initiatives at the store level. During his presentation, he stated: "We are focused on making our existing stores perform better every day. With a rationalized store portfolio, we will improve profitability by implementing operational efficiencies at every step in the supply chain as well as within each store." He also discussed the company's diversified revenue mix, including its consumer packaged goods, food service and licensed stores businesses, as well as its Seattle's Best Coffee brand.
â€¢ Martin Coles, president, Starbucks Coffee International, addressed the effects the economic crisis is having on overseas markets, and the actions being taken to stabilize Starbucks performance in the U.K. and Canada, as well as ongoing expansion of the company's low investment licensed international store model.
The event concluded with remarks from Schultz, highlighting the true differentiator for Starbucks: the daily, human connection between customers and store partners. Sharing highlights from the recent North America Leadership Conference in New Orleans, Schultz spoke about the company's partners (employees) and their passion to serve customers and enhance their experiences with Starbucks, as well as their commitment to the company's long-term success.
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