Who else did the same thing? Kimberly-Clark. It wasn’t sales of Kleenex tissues that drove its better than expected results. The company got a boost from sales of face masks as H1N1 takes hold.
Hungry for more? How about results from McDonald’s? The fast food giant said sales rose in all regions, and it expects sales at existing locations to remain positive in October.
Still craving earnings? Stay tuned this afternoon, when we’ll hear from Chipotle, Cheesecake Factory and Amazon.com.
In its battle to end the myth of the $4 Starbucks coffee — the world’s biggest cafe chain is offering tips on how to save money in its cafes, which are lowering prices on some beverages as they battle market newcomer McDonald’s.
Here are some tips from Susan Nodilo, manager of a popular Starbucks in West Hollywood.
1. Bring your own cup and save 10 cents — and the environment.
2. Order a smaller, unadvertised “Short” (8-ounce) espresso drink, which costs less than a “Tall” 12-ounce drinks, but contains the same amount of espresso.
3. Short on cash, but in love with lattes? Substituting brewed coffee for espresso saves an average of 85 cents per drink.
4. Try a French press. Coffee served in a press costs around $3. Each press yields four 8-oz cups and costs less than two 16-ounce “Grande” drip coffees.
5. Finally, she said, Starbucks’ food and beverage prices include California taxes — so those drinks from competitors may be pricier than you think.
On her way to work in downtown Los Angeles, banker Teresa Roman recently picked up a large iced vanilla coffee. Her cup had no green mermaid, the iconic Starbucks symbol. Instead, it displayed McDonald’s famed golden arches.
Roman switched from Starbucks iced coffee to McDonald’s when the fast-food giant started selling lattes, mochas and cappuccinos as part of its McCafe beverage expansion that launched officially earlier this year.
One would think the move from McDonald’s would be disasterious for Starbucks, which already had been slashing costs and closing stores after overbuilding during the real estate boom. But for all the angst over McDonald’s noisy entry into Starbucks territory, it doesn’t seem like Roman’s behavior is the norm.
As part of our reporting, we talked with caffeine-starved workers in downtown Los Angeles. They said they chose their joe based on a variety of factors ranging from convenience and price to taste.
“It’s not about saving money. It’s about an alternative taste,” said Stova Wong, who picked up a medium regular coffee - three creams, one sugar - at McDonald’s before heading to work in the IT department at a law firm. He now splits his coffee habit evenly between Starbucks, McDonald’s and mom and pop shops.
“McDonald’s coffee is not as dark, but it still provides a good level of coffee taste,” Wong said.
Lawyer Mindy Kay has noticed McDonald’s big advertsing blitz. “It hasn’t made me drink more or less. I did try some of their drinks but I mostly stick to regular coffee … I see McDonald’s first and foremost as a fast food restaurant where I can get good coffee.”
Eric Stevens, a 24-year-old summer associate at a law firm, has been drinking Starbucks coffee nearly every weekday this summer.
“I drink Starbucks mostly out of convenience if the location is close,” Stevens said. The cafe is located in the basement of the building where he works.
Starbucks is his drink of choice for now. He’s never tried brews from McDonald’s, which is only two doors down, but his favorite coffee is from Peet’s Coffee & Tea. Catch what he has to say in this video:
Gary Severson, Wal-Mart U.S.’s senior vice president of home entertainment, told Reuters he thought the deal represented a “screaming value.”
The retailer also plans to cut the price of an Acer laptop with an 8-hour battery by $50 to $548. The computer has 3 gigabytes of memory, a 320 gigabyte hard drive and qualifies for a free upgrade to the Windows 7 operating system when it is released.
Retailers ranging from Wal-Mart, to Target, to J.C. Penney have outlined their plans to lure back-to-school shoppers. Penney is using a special website, jcp.com/teen, to reach web-savvy teenagers who shop for themselves in the back-to-school period but may have less money to do so this year.
But retailers are confronting cash strapped shoppers, who are watching their pennies as the unemployment rate rises and the housing market remains depressed.
Asked for his view of the back-to-school season, the Chief Executive of UPS, Scott Davis, said on a conference call it was too early to tell.
“We’ve not seen a lot of signs yet based on the air freight market and ocean freight market,” he said.
But he said Wal-Mart’s plans to increase its selection of laptop computers was a good sign and perhaps the back-to-school season would be better — a hope likely held by the entire retail industry.
Reuters asked the chief executive of McDonald’s, one of the world’s biggest companies and a closely watched gauge of consumer spending, what every investor wants to know: Has the economy hit bottom?
“In the United States, there is some argument to say that these green sprouts that are showing relative to economic growth are pointing to the fact that we might have (hit) bottom and now it’s starting to grow.
“If you look at some of the sectors relative to the economy, one could argue that we’re not at the bottom and we’re not looking at an upturn.
“I listen to all the economists and others. I’m not an economist; I’m a hamburger guy … Yes, we operate better in a robust economy, but we’re positioned well to operate well in this environment and I don’t think that you would want the CEO of McDonald’s to tell you whether or not the economy of the United States as a whole has bottomed out or headed up. I can only respond regarding the impact that it’s had on McDonald’s.”
Check out those sales rising at fast-food giant McDonald’s.
The burger chain said its April sales at restaurants open at least 13 months rose 6.9 percent rise in April. In the U.S. alone, April same-store sales increased 6.1 percent, helped by new coffee drinks and chicken snack wraps.
Fast-food restaurants have generally held up better in the recession than higher-priced sit-down restaurants.
But even fast-food sellers have not been immune to the impact of the downturn. The U.S. fast-food industry saw its first quarterly traffic decline since 2003 in the quarter ended in February, according to market research company NPD Group.
The stronger dollar, which lessens the dollar-value of sales made overseas, led to an overall 1 percent decline at worldwide McDonald’s restaurants, the company said. Sales rose 8.9 percent in constant currencies.
Same-store sales rose 8.4 percent in Europe, helped by the shift of the Easter holiday to April from March, while same-store sales in the company’s Asia/Pacific, Middle East and Africa segment rose 6.5 percent.
Starbucks wants you to know that it is not the home of $4 coffee, and it’s launching a multimillion-dollar ad campaign to make sure you get the message that its brew is not an expensive luxury.
“Starbucks coffee does not cost $4,” Chief Executive Howard Schultz said this week when he announced the new ad blitz. The ad at left will run on Sunday in the New York Times.
In an email promoting its new campaign, Starbucks said: “Everybody is looking for value, but value doesn’t just mean what’s cheapest; it’s about what’s best for consumers, their families, their communities and the world around them.”
When the company was growing like gangbusters, it relied mostly on word of mouth advertising. ”But during that time … they became, kind of jokingly, the home of $4 beverages,” said William Blair & Co analyst Sharon Zackfia.
The reality is that most Starbucks rivals — with the exception of McDonald’s — have the same pricing, Zackfia said.
Starbucks drip coffee starts at around $1 and stays well below $4, while its specialty coffee drinks like mochas, lattes and Frappuccino blended drinks can top $4.
Chains like McDonald’s — which is wrapping up its U.S. buildout of in-restaurant McCafe counters –Quiznos and others have used Starbucks $4 coffee reputation to their advantage.
Last year, McDonald’s operators in Seattle covered the city that gave rise to Stabucks with billboards reading “four bucks is dumb” and “large is the new grande.”
Check out the consumer thriftiness still reflected in corporate announcements.
McDonald’s, the world’s largest hamburger chain, posted a higher quarterly profit that beat analysts’ expectations.
It also said April same-store sales were trending at least as strong or better than first-quarter sales in every part of the world.
The fast food giant has benefited from consumers cutting back amid the recession as they look for lower-priced fare, including the company’s Dollar Menu items.
McDonald’s Chief Executive Jim Skinner said last week that the financial climate was improving, citing “some thawing.”
The world’s second biggest retailer, Carrefour, wants in on that action. The French company unveiled its own low-cost brand to compete for increasingly cost-conscious customers. The products, mostly food, will be launched in France starting at the end of May.
On the other end of the spectrum, Kimberly-Clark, the maker of Kleenex tissues and Huggies diapers, reported a lower quarterly profit that was pressured by weaker demand for higher-end products.
Check Out what Quarter Pounders mean for McDonald’s.
The world’s biggest fast-food chain posted a 1.4 percent increase in February sales at its restaurants open at least 13 months. Strong same-store sales in the U.S. softened the blow from a stronger U.S. dollar, which eats into the value of overseas sales.
McDonald’s cited demand for its ‘Quarter Pounder’ hamburger sandwich in the United States — a testament to the trend that more consumers are migrating to cheaper restaurants as they try to save money in a global economic downturn.
For example, the Arby’s unit of Wendy’s/Arby’s, which competes with McDonald’s, faced a tough time in the past quarter as rivals offered discounts to lure diners, while the Wendy’s segment, with its revamped 99-cent value menu, fared better.
McDonald’s, which caters to roughly 58 million consumers every day, still expects the dollar’s strength to pressure its sales and margin comparisons in the first quarter.
Once upon a time, Starbucks had nowhere to go but up.
My, how times have changed.
Chief Executive Howard Schultz in July said the upscale coffee chain would not combine menu items and sell them at a discount, a move made popular by fast-food chains like McDonald’s.
“We’re not going to go down the fast-food lane,” Schultz told investors back then — when the company’s business was hitting the skids in a housing-led slowdown.
On the heels of news that McDonald’s will finish adding McCafes to U.S. stores by the middle of the year, Shultz is now touting a plan to offer several “breakfast pairings” at “attractive price points” beginning in March.
“The question of value often gets tied to the competition. How are we competing with (quick-service restaurants)? How can a premium brand be competitive when customers are trading down on everything from houses and travel to clothing and lunches out?” said Schultz. “We will combine our breakfast strengths with a value proposition that challenges misperceptions about our every day affordability.”
As it pays the price for its expansion exuberance, Starbucks is slashing another 300 namesake cafes around the world, bringing its closures to 1,000, cutting thousands of jobs and putting its brand new Gulfstream jet on the blocks.
In the midst of it all, Starbucks hopes to attract Seattle’s Best Coffee franchisees.
“We recently began exploring ways we could leverage Seattle’s Best Coffee brand to work for us, starting with a food service test in more than 2,800 Subway restaurants in the US beginning this month,” Starbucks Chief Executive Howard Schultz said. “I’m pleased to share with you today (that) we are expanding our franchising program with Seattle’s Best Coffee.”
Starbucks executives even suggested that Seattle’s Best franchisees could be good tenants for stores that will been vacated in the latest round of Starbucks closures, which bring the company’s total store closures to nearly 1,000.
Starbucks bought Seattle’s Best in 2003.
There are currently 12 Seattle’s Best franchisees who operate 36 cafes — some of which are located in Las Vegas casinos. Borders bookseller and grocery chain Albertsons are among the stores that house the more than 500 Seattle’s Best licensed cafes.
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Hershey said price increases helped offset rising cocoa costs, but was silent on the biggest news in the chocolate world — will Cadbury be acquired?
Starbucks
