Interview: For the record
>> welcome back to “for the -record” starbucks reebtly boosted forecast for new stores saying it will expand in the u.s. to 15,000 outlets and plans to have 30,000 stores globally. we asked howard schultz and jim donald at what point the company reaches at thation. at what point do you have too many stores in the united states?%
>> that’s a great question. i don’t think we’ve reached that point yet. what we’re hearing from our customers is that we do a lot of focus group studies they’re telling us the number one itd temp on their list for starbucks is more stores.
>> it’s interesting, howard, in your book several times you mention the fear of ubiquity. at what point does that become a negative?
>> i think that over the years we probably have underestimated the size and scale of the market opportunity for the number of stores. we’ve always been extremely sensitive to the issue of u ubiquity. the question we’ve asked is how do you get big and stay small. how do you main taib a very local flavor and local relationship to the community and i think we have managed to use ubiquity as our friend. and what i think the art of being a great retailer is preserving the core, enhancing the experience and maintaining your relevancy whether you have one or ten or hundred stores in the market . and we’ve done that very, very well.%
>> what’s interesting, interesting comparison or model is what’s happened to krispy kreme lately. and one thing that analysts and invest rs have said one of the problems ran into is donuts became too readily available. that the company lost the cache, how do you avoid that problem?
>> i don’t know that much about krispy kreme. but i think the experience that we’ve created, the intimacy and trust with our customers and again the environment that we’ve created has become really this third place between home and work and extension of people’s lives in ways that candidly i% -don’t think we planned on in the early stages. so we’ve been able to capture and create an emotional relationship with our customers that’s quite different than any one in fast food business. that’s something we pride our stefls on. we’ve never viewed ourselves as being in the fast food business.
>> how do you deal with the fear or how fearful are you that coffee willal out of favor. it’s very popular, very much an activity. you say place for people to meet and do. but what happens when that changes or if that changes.
>> hive been asked that since i was raising private equity for the company, when we had ten stores. this is a fad, what if it goes away.% i think coffee’s been around for centuries, it’s part of the rich wall of how we start our day. it’s become a relationship product that is well beyond just the coffee itself. and i think we view ourselves in many ways we’re not only in the coffee business, equity of star bruks brand is that we’ve become the quintessential experienceal brand. and the value of what we create is well beyond the coffee itself.
>> we look at the starbucks experience as something that’s not going to go away. and whether the economy is great, whether it’s just so-so whether it’s doing poorly. we’re going to get great cup of coffee and get away from some of the things that are driving whether it’s driving the economy or people to our locations. connection that they get with us through our partners and through our coffee to me just overrides whatever the economy is.% and it’s all about that experience.
>> how does that translate into the smaller market as they move, does the coffee translate?
>> we’re opening in markets now that i’ve never dreamed we could be in. and not only are we opening but the economics are stronger in many cases because of the rent structure and the value that we brick to that neighborhood or community or landlord. >> give us an example --%
>> and the demand.
>> give us the example of the drive through how profitable are those?
>> the drive throughs majority of the drive-threw business is incremental. and economics of the existing drive throughs, the future ones we have planned are very significant driver to the long term success of the business.% -
>> because they are more profitable.
>> they are.
>> why is that?
>> because there’s another channel of distribution which is those many people who are stopping with their cars or customers that would not have stopped normally. and i think to our credit we’ve been very disciplined over the last five or ten years not to spread drive throughs across the country until we had mature brand economies of scale in that market so we do not appear as fast food purveyor. i think again it demonstrates the thoughtfulness of how we view the brand and our position want to make very clear that we’re not in it just to grow the business. we want to build an enduring, great company. want the brand to stand for something. that’s why we believe that all of these opportunities that we haven’t chased in the early stages are there for us now and they’re in ways that we are very excited about and i think this speaks for long term value of the company in terms of the stock price.%
>> i have to say something on drive through. it is still the third place experience that we’re creating in the drive-thrus across the cub tree. one here in seattle where one of our partners is identified as a voice of all the different customers and has his or her name down with the kind of car they drive and what animal is in the seat.
>> starbucks is testing hot food at stores in washington state, it’s also been introducing kiosx, is that let consumer run their own music. is the company moving away from the core coffee base. when “for the record” continues.
在线播报
Listen Interview: For the record
>> welcome to “for the record.” started as chain of four coffee stores in seattle that sold only coffee beans. today the company is more than 8700 stores around the world, with plans to boost that presence to 30,000. annual sales are 30% last year, but the company told investors they should expect revenue to grow closer to 20% a year over the next three to five years. what can the company do to accelerate growth? and how can it keep customers coming in to pay almost $4 for a cappuccino that cost us pennies ingredients to make? we sat down with starbucks founder and chairman howard schultz and incoming chief executive jim donald at starbucks head quhawr terse in seattle and asked hem. howard, give us a sense, how quickly can you continue to grow sales?
>> well, i think that we’ve demonstrated over the last three to five years that the growth and development of the company is not only consistant but the growth and development of the company is way, way in front of us. we feel very strongly that these are still the early days embryonic days for the growth of the brand, number of retail stores and as you know we just changed and updated the number from 25 to 30,000. i think at the end of the day we’ll find that number is going to be light.
>> jim, what about you when you look at the coming three to five years, is it can be maintained 20% sales growth what happens after that? for example, a company like mcdonald’s that now more consistently has―compared to double digit sales growth. how do you prepare investors for the fact that sales growth most likely will slow down? >> well, we had that question before. to howard’s point how can we grow so fast we’re also hearing a lot from our customers. every time we talk to our customers one of the key thiks they tell us they want more starbucks. they want more convenient locations. you can imagine that we’re currently give them. when we look at the population in the u.s., for example, and look how many stores we have and we look at the next three to five years we think as howard said we’re in the early days.% our growth organically can continue over the next three to five years to continue the rate that howard mentioned.
>> what do you say to investors to analysts say you’ve had―we’re concerned you’re going to decelerate below 20% growth.
>> if you look at 2004 which i think is year of ak acceleration, 30% growth in 2004 was the largest single year we’ve had since 1999. and when we look at the next few years of at least 1500 stores a year, we’re opening four stores a day now, hiring 200 new partners, serving over 35 million customers a week. the brand has never been stronger.% we continue to innovate. i ifink if there is one mistake we’ve made we’ve underestimated the size of the market both domestically and internationally we are getting our arms around the fact that the size of starbucks total store count is very, very significant. not to mention the ways in which we think we can leverage the brand for other channels of distribution.
>> but, jim, certainly investors haven’t underestimated. the shares trade for 40 times estimated 2006 profit. shares near record high. butable litsdz can add hold rating on the stock. what do you say to people whether or not the stock can go higher?
>> we look at the performance in the past and what we said going forward the next three to five years then fill in the blank. we give them why we think this is possible, be it sheer number of stores that we’ll put up or be it this innovative pipe lib that actually gives a little credence to what we’re saying in that growth plan three to five years out.
>> let me ask your reaction to one investor that i spoke with said the air is thin at these valuations, what is your response?
>> i think the air is always thin in relationship to companies that perform at a very high level. the market rewards performance, we’ve had 12.5 years of basically being able to under promise and over deliver. we’ve had 150 consecutive months of positive coms unparalleled by the best of% -the class. we have top 50 grand globally. so when you have these kinds of performance metrics there is very little room for disappointment.% we recognize that, we’re% responsible for that. having said that we’re very, very bullish on the long term spos pekts of the company and specifically i think over the next five to ten years what we will prove is that starbucks will be one of the most recognized and respected brands in the world if not the number one.
>> let me ask you --
>> one point, because being in retail all my life having the numbers that we’ve been reporting on sales it doesn’t happen in a regular retail environment. as our coms for november showed, everybody you hearsaying not sure how christmas will turn out. go down to the last ten days prior to christmas. we had probably the highest single market in comps since november of 1995 that we reported.
>> i assume it’s not comfortable to be chairman to be incoming c.e.o. with val -- cpral u waiksz at this level?
>> we’re not concerned. we’re very comfortable and confident in what we think the opportunities are. if you look at history of starbucks stock price coupled with the level of performance, anyone who has ever owned a stock for a long period of time has been significantly rewarded.
>> let me ask you are you thinking about splitting shares?
>> i’ll let howard―he’s been around longer.
>> we’ve split a number of times along the way. i think in this time around we’ve set candidly that it’s not something that we’re focused on.
>> and pay can dividend your cash is getting closer to a billion dollars.
>> i think that we have to be very mindful of our fiduciary responsibility with regard to dividend. but having said that, the growth of the company is rewarding the shareholders in terms of the significant long term value. stock is up more than 70% this year. more than 4,000% since 19 the 2. i think our shareholders significantly have been rewarded by the policy we’ve had which has been no dividend and invest the money back into the business.
>> starbucks has plans to boost number of stores from about 8700 to 30,000. when “for the record” continues we asked howard and jim about whether the starbucks name is losing its cash.
