Filed under: Forecasts, Management, Starbucks (SBUX)

In a brilliant article in The New York Times, the paper points out that of all the mistakes that Starbucks (NASDAQ: SBUX) made in its expansion, picking real estate locations may have been the worst. Much of the analysis for the piece came from talking to real estate brokers. The paper writes, “In some cases, brokers say, Starbucks misjudged the risks of putting stores close to each other, leading to the decline in same-store sales.”

It is astonishing that Starbucks would make such basic errors and speaks to what happened to management during the period when founder Howard Schultz was absent from the CEO job. The team that replaced him said it believed the company would eventually have 40,000 store worldwide. It clearly cut corners in terms of planning to get there.

The real trouble with the real estate location decisions is that it may take a very long time to fix. Closing stores may be easy, but finding better spots, negotiated for the space, and building out new stores will be time consuming and, perhaps, expensive.

Schultz and his minions are paying for rampant growth, and the poor souls who worked for him are paying more. Almost 12,000 will lose their jobs.

Douglas A. McIntyre is an editor at 247wallst.com.

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This entry was posted on Friday, July 4th, 2008 at 5:14 pm and is filed under Stocks Money News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.