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[sonofgodzilla]

Andrew Clark, New York
August 5, 2006

THE world's biggest coffee chain, Starbucks, is struggling to cope with long queues of impatient customers seeking iced frappuccinos to provide relief from record heat in the northern hemisphere.

In a rare financial setback for the rapidly growing company, Starbucks announced that its like-for-like sales rose only 4 per cent in July — lower than in the preceding nine months and below its trend of a 6 per cent increase over the year.

The shortfall sent Starbucks shares down by 11 per cent on the Nasdaq on Thursday. Investors are used to rapid expansion in profits from the company, which has 11,784 stores worldwide.

Starbucks chief executive Jim Donald said the company's iced drinks took longer to make than its coffees, causing frustration and prompting some caffeine-seekers to go elsewhere.

"Customers are embracing these cold-blended beverages as a morning staple to a degree that we had not anticipated," Mr Donald said. "We have recognised the opportunity to refine and improve our cold beverage station to make drink preparation more efficient and improve service over time but, in retrospect, we did not move aggressively enough." He said customers were not proving to be patient: "We believe we are losing some espresso business due to longer than normal wait times in both cafes and drive-throughs during peak morning hours."

But Starbucks' revenue leapt 25 per cent to $US2 billion ($A2.6 billion) for the three months to July as new stores pushed up sales. Profit grew by 16 per cent to $US145 million.

The company disclosed that it would be more aggressive in opening new stores, with 2000 planned this year, rather than the previous 1800.

India and Russia are likely to see their first Starbucks next year.

Analysts suggested there could be more to the shortfall than booming frappuccino sales. Don Gher of Coldstream Capital Management asked: "Is this a strictly one or two-month problem because of the cold, blended beverages? Or, is it something that is a macro-economic pressure? In other words, has consumer spending slowed and has that hurt them as well?"

GUARDIAN
http://www.theage.com.au/news/business/hot-customers-put-starbucks-on-ice/2006/08/04/1154198331746.h...