Starbucks (SBUX) Prospects Positive Amid Efforts to Reinvent Brand Image

Remy Merritt |

starbucks stock, coffee prices, new starbucks locations, starbucks stores, interior design, retail design

Starbucks (SBUX)  is paying new attention to store design, joining the likes of Google (GOOG) in adapting interior vibes to the local culture.

July 16 marks the debut of Starbucks’ first store in Colombia. The store’s long glass doors opened in the capital city of Bogota with a promise to honor the country’s rich coffee heritage in an iconic three-level coffeehouse. The interior is sophisticated and offers four different seating areas, including an outdoor terrace and a coffee bar reminiscent of specialty coffee shops where patrons can observe various brewing processes. Simplicity is the name of the modern architecture game, a style pioneered by starkly classy Apple (AAPL) retail stores. Peter Bohlin, the architect behind 14 flagship Apple stores, also claims the Pixar headquarters in Emeryville, CA and Seattle’s City Hall in his repertoire of popular glass-heavy structures.

But efforts to reinvent retail image are not always successful. Ron Johnson, Apple’s former vice president of retail operations from January 2000 to November 2011, tried his hand at a J. C. Penney (JCP) revamp while serving as its CEO. His aggressive and abrupt changes left J. C. Penney customers alienated, and, just 13 months later, Johnson was relieved of his CEO duties and replaced by predecessor Mike Ullman. His strong stance against discounting and attempts to reinvest the savings into introducing more stylish brands worked against him. Apple’s store culture was new and malleable, but J. C. Penney’s image was established and unchangeable.

While J. C. Penney patrons may have strict expectations of store image, Starbucks has better prospects for using store renovations to boost popularity. It has a wide range of customer demographics, particularly with younger crowds of the Apple generation that are tuned in to thinly decorated, sleek retail stores.

Starbucks senior designer David Daniels has said of the design process, as I draw I think about how somebody might meet the girl of their dreams there. All sorts of things could happen there.” With an eye on sustainability, Daniels and his design team have opened more than 500 LEED-certified (Leadership in Energy and Environmental Design) stores in 18 countries since 2010.

Attempts to refine and remake Starbucks’ image from generic chain to chic coffee bar come amid what appear to have been a rocky six months. Stock volatility is currently trending upward, with share prices up 4.5% since mid-January. And while the Starbucks ticker looks like an erratic roller coaster, with sharp spikes and even sharper drops, a closer look reveals that the ups and downs generally represent percentage changes in the single digits.

The adoption of La Boulange food items opened the Starbucks market to the lunch and dinner crowd, as did its line of Evolution juices and Teavana iced tea to those not interested in the coffee buzz. After years of trials, 27 core United States Starbucks locations now offer happy hour-esque “Starbucks Evenings,” with wine and small plates available after 4 p.m.

In the last six months Starbucks generated about $1.3 billion in free cash flow. This, in addition to its history of increasing dividends, makes it an attractive option for investors. The evolving “Starbucks Experience” appears to be working in the corporation’s favor as it moves away from issues of coffee shop saturation. With plans to open 1,500 new stores this year, prospects appear to be good for the coffee conglomerate.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 110.30 0.35 0.32 13,972,618
GOOG Alphabet Inc. 764.14 5.03 0.66 678,437
SBUX Starbucks Corporation 58.35 0.91 1.58 4,387,492
JCP J.C. Penney Company Inc. Holding Company 10.21 0.19 1.90 8,653,302
PDM.DB:APH Pdm Royalties Income Fund 7.75% Debs n/a n/a n/a n/a

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