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The “grass roots” survey, which represents a geographic mix of stores across the U.S., indicates that July same-stores sales growth continued to improve from June levels with 76% of respondents reporting a sequential improvement.  In fiscal 3Q09, U.S. reported comparable sales declined 6% (better than the 8% decline in 2Q09) and management stated that the numbers got stronger throughout the quarter.  Based on that statement, it is reasonable to assume that June same-stores sales were about -5% or better, and July looks to have improved from that level. 

Over 75% of respondents reported flat to positive same-store sales growth.  Overall, the survey indicates that same-stores sales growth was flat to +1%, which like in past months seems too good to be true.  Providing a haircut to the numbers would put comparable sales growth at -2% to -3%, which at first look also seems aggressive, but it is important to remember that SBUX is lapping a -8% number in the U.S. from 4Q08 so comparisons definitely get easier.  A 3% decline in U.S. same-store sales for 4Q09 would represent a 2-year average trend similar to that of 3Q09. I continue to think that it is more important to focus on the numbers on a directional basis, rather than looking at the absolute numbers, and directionally, the respondents are seeing better results in July than they did in June.

As we stated following SBUX’s 3Q09 results, MCD’s McCafe does not appear to be negatively impacting SBUX’s sales.  The survey’s findings actually seem to mimic CEO Howard Schultz’s comment that the increased level of advertising around the QSR coffee segment seems to be benefiting SBUX by increasing trial with more respondents saying that MCD’s premium coffee initiative is having a positive impact than those experiencing a negative impact.