Starbucks and the Economic Crisis

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The Seattle Times Jon Talton suggests the coffee-maker's ongoing financial problems may be an "artifact" of deeper economic troubles:

"What if Starbucks is an artifact of an economy that's not coming back? A time of rising, if fleeting, American affluence as we moved from dot-coms and telecoms, to day trading and house flipping, all based on the biggest run-up of debt in the history of the world. For this venti, triple-shot America, it might have been the quintessential bubble drink...

Although Starbucks suffered a 77 percent drop in its fiscal second-quarter net income, it actually beat analyst's expectations slightly. Its shares have been generally rising since March and have outperformed the Standard & Poor's 500 Index... Still, same-store sales remain in negative territory, a critical measure for any retailer. For two years, it has underperformed the Dow Jones Restaurants and Bars Index (yes, there is one).

Looking back, Starbucks' fall was a leading indicator of the trouble massing across the land. Now the question becomes whether the America that emerges from the financial shock of the Great Disruption will have the appetite, and the cash, to fund Starbucks' hopes.  How long will Wall Street just wait and see? However the recession has changed America, Wall Street is still in a pre-2007 mindset, and it may demand growth that Starbucks simply can't deliver anymore."

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Richard Florida is Senior Editor at The Atlantic and Director of the Martin Prosperity Institute at the University of Toronto. See his most recent writing at The Atlantic Cities. More

Florida is author of The Rise of the Creative Class, Who's Your City?, and The Great Reset. He is founder of the Creative Class Group.

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