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Starbucks Jitters Normal?
Board: Starbucks Corporation

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By Goofyhoofy
March 15, 2007

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The downward spiral appears to be much more than the market correction. How much further down?

Starbucks has always had higher volatility than the market. When confidence is good, Starbucks roars ahead. When the market turns cautious, Starbucks is always one to get smacked. It looks like Starbucks has bounced between 30 and 40 (roughly) a couple of times lately. So, a 25% retrenchment is pretty scary stuff, if you're not used to it, or prepared for it.

In 1999 it dropped 9 1/2 to 6 (split adjusted) in a day when a bad earnings report came out. That's a knock of 37%, all at once. In 2000 it dropped from 11.25 to around 7 over two months in April and May, a tick of 26%. In 2001 it went from 13 to under 7 between March and September; that's a drop of 45%. In 2002 it went from 12.75 to 9.25 between April and August; a drip of 28%. In 2003 the worst drop looks like it was 13.5 to 11.5 over a 30 day period in April/May. Only a 15% dip. In 2004, from 24 to 21.50 came in August, a remarkable year in which the worst correction was only 10%. How about 2005? 31 to 22.50 between January and April, you lost 27% in two months. And last year, we dropped from 40 to 28 between May and August, another loss of 30%.

Now scattered somewhere among all those losses were a pantload of gains, a split or maybe two, and perhaps an ulcer if you're susceptible.

I read one deranged worry wart on an AOL blog today who opined that Starbucks needs to take its cue from Wal-Mart, they might already be oversaturated, and they're trying to change the mix of their stores to attract more people by selling records instead of coffee.

Taking your cues from Wal-Mart, so help me, a stock which hasn't moved in 5 years, whose SSS trail their industry, and who is besieged on every front. (And which I also own, FWIW.) And they're "changing their stores" because they're worried, or something. Sheesh. Double sheesh.

Well, anyway, no one is going to tell you "where's the bottom" because it's impossible to tell. If people lose confidence in the market - if the housing truly "busts", if a recession comes along, then there can be a long way down, particularly for Starbucks, which (as noted) is a high-flier. That's what you bought. That's what I bought, but I'm expecting earnings compression along the way, and I'm in from several many years ago (and have a fairly large holding) so I'm sitting, expecting continuing growth across the next decade. (Which is not to imply that I'd hold that long, although that's possible, too.)

[I used BigCharts to compile these rough figures; I linked each one but noticed that it's done through a javascript (I guess) interior to the page and the URL doesn't track the specifics, so I can't make each chart pop up easily for you. But feel free to make a "custom" chart, and just go Jan 1 to Jan 1 of each succeeding year. This is nothing new for Starbucks. Happens nearly every year. Been happening for as long as I remember.]


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