Nobody Goes To Starbucks Anymore, It's Too Crowded

You've got to feel sorry for Starbucks chieftain Howard Schultz. No sooner does he announce that he's turning over the CEO job to his deputy, Kevin Johnson, mostly to free himself up for the way cooler job of running the new, deluxe end of the business (Roasteries in glamorous places like Milan, Italy) than the company's underlying numbers start to fall apart.

Its new mobile-ordering app actually worked so well (25 percent of all orders) that it caused backups in the stores. As reported last month by Bloomberg, the pickup counters got overwhelmed, and more than a few customers walked away from their orders. "Congestion at the handoff," is how Johnson described the situation, which dragged down SBUX performance.

 

But that's far from the only thing clouding Starbucks' coffee these days.

There's the weather, for instance. In many parts of the country, it's been a warmer than usual winter, so fewer people are ducking into coffee shops to warm up. Foot traffic, as measured by the research firm xAd, was down. Starbucks usually gets 12% of restaurant traffic, but only saw 11% in January.

UPDATE, 3/9/17: Foot traffic, it must be said, does not equal market share. Starbucks remains in the enviable Number Two spot for share of foot traffic in the closely tracked Quick-Service Restaurant category, still ahead of Subway and Burger King. (McDonald's is way out in front, not surprisingly.)

 

And the competition is trying to lure away Starbucks regulars as well, with special pricing and deals on beverages. Among the rivals offering coffee-based drinks: McDonald's, Dunkin Donuts and Panera.

Then there's the political climate. Schultz, who was touted as a possible Secretary of Labor in a Hillary Clinton cabinet, said Starbucks would hire 10,000 refugees, a promise that prompted a strong backlash on social media even though the number is less than 5% of its workforce and most of the refugees would have been hired at Starbucks locations outside the US.

But the worst damage was self-inflicted, when Schultz announced, in January, that Starbucks was cutting its revenue forecast. Investors punished the stock for a week. (It was off 46 cents today, about 1%.)