The latte indicator has spoken, and well, the results aren’t good. As Starbucks (SBUX) sputters and is forced to close 600 stores, the outlook for the economy has yet to improve either. But that doesn’t mean people don’t have time for “Save Our Starbucks” campaigns. While these rallying cries were inevitable and we can’t say we’re optimistic that Starbucks will change its mind about too many stores, SBUX must be loving the free publicity.
The closures, however, do shed light on at least one SBUX failure: growing too big, too quickly. While big states like California, Florida, and Texas had the largest number of announced closures, the proportional impact will be greatest in many less dense states. Mississippi is projected to lose 41% of its Starbucks, North Dakota, 33%, Minnesota, 32%, and Nebraska, 30%. Some markets just weren’t ready for Starbucks and some may never be. And once a gallon of gas actually started costing more than a cup of Starbucks coffee, that sealed the deal.
Here’s the real question, though: Will Starbucks cave to its customers protests to keep the stores open? If so, will this derail the company’s latest turnaround plan? (The market hated the plan anyway, so not a huge deal, but a reversal here would further damage Starbucks’ credibility.)