SBUX - Commenting on Competitor Comments

In the past I have paid for the CREST data and found it to be completely unreliable.

Here is an example of how misleading the data can be: Taken from the MS SBUX note ... It says that based on CREST data "For CDRs: the Bar & Grill fared best in May, posting +3% total sales growth, likely the beneficiary of increased discounting/promotions in the space (think Chili's, Ruby Tuesdays, Applebee's & TGI Fridays)."

We know from Malcolm Knapp, however, that May comparable sales trends for the Casual dining industry declined 6.7%. Mr. Knapp's data is much more reliable as it comes directly from the companies and not from consumer surveys. What the consumer says is happening (NPD Crest data) and what is actually happening within the four walls of a concept (Malcolm Knapp data) may be completely different.

The MS note highlights that May CREST data showed a significant YOY decline in total gourmet coffee/tea sales. Gourmet anything is not doing well in this economy, that we know! First, I again question the validity of the data. Second, although MCD's McCafe sales are not included in NDP's gourmet coffee/tea numbers, such a falloff in category trends would impact all major coffee players. Why is this not a negative for MCD too? Consumers are trading out of gourmet coffee to go to MCD? Or are they trading out of "gourmet coffee," which will impact everybody and not SBUX in isolation.

Additionally, there are 102 different chains included in NPD's gourmet coffee/tea category survey so there can be lots of noise in the data. If you would like to see the list of companies included, please call or send an email and I will send it to you. It's important to note that Dunkin' Donuts and Tim Hortons sales are not included in NPD's gourmet coffee/tea numbers but rather in its Donut category.

My SBUX "grass roots survey" indicates that May same-store sales on average were flat to -1%. This compares to our previous survey indicating that March same-store sales on average were flat to -3%. As I said in March, these numbers are so good I don't believe what I'm seeing. Naturally, I provided a haircut to the numbers, but that would still put SBUX same-store sales at down 3-4% versus 5-7% in March (please refer to my June 19th post titled "SBUX - GRASS ROOTS SALES SURVEY FOR MAY 09" for more details).

A quick comment on SBUX from Keith McCullough: $13.60 is good support with the backstop of intermediate TREND line support = $12.85.


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