I'm a Starbucks
When our stocks fall so much, we tend to step back and question whether we should hang on. I'd been wondering about Starbucks, but I also told myself that at least part of its downfall has been due to the economy instead of anything the company is doing. When we're in a recession, $4 coffees and pastries don't seem like necessities.
And sure enough, Starbucks isn't the only provider of high-end treats that's been suffering lately. Shares of Tiffany
Given the pessimistic outlook for luxurious brands in the near future, I turned to a book and a website to help me decide whether I should sell or hold on.
The book
First, I read Michael Gates Gill's book, How Starbucks Saved My Life. In it, a laid-off advertising executive, desperately trying to make ends meet, ends up working at Starbucks -- and loving it. I found the book honest and inspiring, both about the resilience of the human spirit and about the good intentions a company can have.
I learned a bunch of interesting things about how Starbucks is run. For instance, the company expects employees (called "partners" and given benefits such as stock and health insurance -- even if they're only part-time) to "connect" with customers (called "guests"), by making conversation and trying to eventually learn their names. Secret shoppers are regularly sent to stores, to see how the partners are treating their guests.
I walked away impressed with the company and its ideals. The company's focus on connecting with its customers is encouraging -- it can be enough to keep many folks coming back, even in hard times.
The website
However, in scanning the Web for comments about the book, I ended up at the starbucksgossip.typepad.com blog, where I found a host of current insights into the company, following its not-so-pretty quarterly earnings report.
For example:
- Many bitter, cynical employees posting on the blog say they're being overworked lately, because of cost-cutting at the company.
- Store managers are reportedly being allocated less "non-coverage time," which is time they're not working behind the counter, when they tidy up the store, manage schedules, and tend to other details.
- Employees are worried about keeping their jobs because they're apparently being asked to do more work in the same amount of time and are being held to the same standards as before.
Altogether, the site left me troubled. Contented baristas are a key component for Starbucks to deliver the service that its customers expect.
A verdict
I like Starbucks' focus on customers. That trait that has helped other companies, such as Amazon.com
But if the blog is representative of many employees' feelings, then Starbucks is not effectively getting the rationale for its strategies across to its workers. If it has no choice but to make working conditions tougher right now, and it conveys that message successfully, then more workers might give it the benefit of the doubt. In the meantime, though, customers are being served and the economy is likely to recover -- eventually -- and when it does, it will bring with it more dollars for fancy drinks. So I'm not freaking out.
If I rank my holdings by my confidence in the company, Starbucks is not near the top, so I may still end up selling when I want to buy another stock. But for now, I'm holding on.
What should you do? Well, in times like these, some folks don't engage in much deliberation and simply sell, in a panic -- but that's not a sound approach. Whatever you do, don't be rash. But if you've decided you want to sell, and you're looking for some promising, undervalued companies, I invite you to test-drive -- free for 30 days -- our Motley Fool Inside Value newsletter service.
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