Ahead of the Bell: Starbucks analyst conference

NEW YORK - Starbucks Corp. is hosting a conference Thursday in New York to update analysts about the state of the company's transformation to a leaner and more socially conscious premium coffee retailer.

The company last hosted an analyst conference in 2006 where Starbucks unveiled its plan to open 40,000 global stores.

Starbucks is in a drastically different place these days due, in part, to the consequences of that growth. Amid sliding sales and profits, the company is now in the midst of closing more than 600 stores in the U.S and 61 stores in Australia and has had to eliminate more than 1,000 positions.

The company has also worked recently to focus on more socially conscious business initiatives, like donating money from sales of holiday drinks to the Global Fund to help raise funds for and awareness of AIDS in Africa.

Chief Executive Howard Schultz is known for being optimistic and prone to talk more about his vision for the company's future at company events, but one analyst said in a note earlier this week that he's hoping for some "plain talk" about the current state of the company.

Deutsche Bank analyst Marc Greenberg said in a note to investors Monday that Starbucks needs to acknowledge the power of lower-priced competitors like McDonald's Corp., which is now offering latte-style drinks to customers, and Dunkin' Donuts, to steal its customers.

Greenberg, who has a "Hold" rating on a $10 price target on the stock, also said he hopes to hear more from the company about how it plans to counter declining consumer spending. Consumers have been sharply cutting back on discretionary purchases as the economy has slid further into a recession.

The analyst said the company's new Gold Card — a customer rewards card that offers discounts and giveaways — will not "interest Wal-Mart shoppers and McDonald's customers enough to come in, let alone spend $4 on a latte."

Starbucks has long said its customers differ from those of its discount competitors. Starbucks has said its customer base is looking to graduate to a bolder and better cup of coffee and is more able and willing to pay for it.

Still, some analysts have been skeptical that the rewards program and the company's cost-cutting initiatives will be enough to jump-start profit and sales growth.

Goldman Sachs analyst Steven Kron said in an analyst note Tuesday that he sees "little visibility for a meaningful recovery in same-store sales trends over the next year, which will be key to sustained margin improvement and share appreciation."

Same-store sales, or sales at locations open at least a year, are a key indicator of retailer performance since they measure growth at existing locations rather than newly opened ones.

Kron has a "Neutral" rating on the shares.

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