Delores Jensen, of Shoreline, woke up at the crack of dawn to call her stockbroker on the morning Starbucks went public in 1992. "I knew this was...
Delores Jensen, of Shoreline, woke up at the crack of dawn to call her stockbroker on the morning Starbucks went public in 1992.
“I knew this was going to be a winner,” she said.
Jensen still owns most of the shares she bought, and still believes in Starbucks, even though lately “we’ve lost a lot of money,” she said.
Wednesday, Jensen and her husband, Hans, attended the company’s 18th annual meeting at McCaw Hall, where CEO Howard Schultz assured investors that “Starbucks Coffee Company will not only survive, but we will succeed during this environment. I promise you that.”
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Schultz promised to combat Starbucks’ competitors and what he called “the myth of $4 coffee,” and said the company will meet consumers’ need for value in a tough economy.
Jensen and other shareholders said they didn’t mind Starbucks’ new frugality, such as not sending free drink coupons with this year’s invitations to the annual meeting.
“He’s trying to cut corners,” she said of Schultz.
In fact, Starbucks is trying to cut $500 million from its annual operating expenses, which last year totaled about $10 billion.
Starbucks gave an idea Wednesday of where the cuts will come:
• Almost $200 million from already announced layoffs and other expenses outside stores;
• A little over $100 million from store closures;
• About $100 million from productivity improvements in stores;
• And about $100 million from efficiencies in other areas, like coffee buying and distribution.
The company also will “evaluate a dividend as a possibility,” Chief Financial Officer Troy Alstead said, answering a shareholder question about whether dividends might be issued, using some of the $500 million in free cash flow Starbucks expects this year and possibly again next year.
Many companies that have slowed expansion still balk at dividends, partly because it means acknowledging they are no longer a “growth” stock.
But investors love the idea.
“The first time you see that cash-flow number, you go, ‘Hmmm. When do I get a piece of that?’ ” said stockholder Jean Thompson, of Ballard.
She appreciated the tameness of this year’s meeting.
In contrast to the fire hose of product and other announcements at last year’s meeting, where singer-songwriter k.d. lang performed, the meeting this year brought no big announcements, little music and few broad smiles.
Schultz’s typically charismatic tone was subdued, even when he talked about fighting competitors who want to steal market share.
“We’re going to take the gloves off and really differentiate those who are making claims from Starbucks,” he said.
Many companies that sell coffee don’t roast it themselves, and their employees don’t know where the coffee comes from, Schultz said.
“We’re not going to be silent too long,” he promised, without giving specifics about how Starbucks might respond.
Schultz hinted the company might advertise more and he showed several TV spots Starbucks aired in the past year.
Historically, the coffee chain has eschewed traditional advertising, relying instead on word-of-mouth and other avenues for brand awareness.
Currently, Starbucks is airing TV spots in Chicago to promote its new instant coffee, Via.
It is comparing sales there with Seattle, where Via went on the market a couple weeks ago without an advertising campaign.
Schultz also wants to dispel the impression Starbucks coffee costs $4.
“Starbucks Coffee Company has become a poster child for excess,” he said. “We have been silent and allowed other people to define us.”
To set the record straight, Schultz said that half of Starbucks’ beverages cost less than $3, and a third cost less than $2.
Shareholders should “stay tuned” for what the company is going to do about such misconceptions, he said.
Starbucks plans additions to the gold-card program launched last year for regular customers, and it will roll out a new store design that began with the opening of a rustic-looking Starbucks coffeehouse at Pike Street and First Avenue last week.
The next will be a remodeled store at University Village, Schultz said. “Then we’re going to take the show on the road.”
Fewer people attended the annual meeting than usual.
The Seattle Department of Transportation had warned that as many as 7,600 attendees might clog the roadways around Seattle Center on Wednesday morning. Although a few thousand people showed up, Starbucks did not have to use its overflow room for the first time in years.
Attendance was smaller partly because hundreds of employees watched the meeting live from Starbucks’ headquarters building south of downtown, a spokeswoman said.
Starbucks shares closed Wednesday at $11.50, up 36 cents, or 3.2 percent. The stock is down almost 37 percent for the past 52 weeks, about as much the major market indexes.
Jensen left the meeting more confident than ever that Starbucks is in good hands.
“He’s a go-getter, Howard, and he’s not going to let anything happen to that company.”
Melissa Allison: 206-464-3312 or firstname.lastname@example.org