The Starbucks Indicator

July 2, 2008
By seadmin

It seems as though many people have taken my advice and stopped spending all of their extra money at Starbucks.

Today, even Starbucks (SBUX) came out and said times are getting very tough. The company announced that it will close 600 company-operated stores in the next year.

Sorry guys, but it seems as though people are realizing that $4 for a 12-ounce latte is just not worth it — especially when we’re paying more than $4 for 128 ounces of gasoline!

The Seattle-based beverage merchant did not say which stores will be closed, but they did say that the stores are spread out throughout the country. In what I think is a very telling sign, the company also said that 70% of the stores slated for closure had opened after the start of 2006.

To put that in percentage terms, Starbucks is closing 19% of all U.S. company-operated stores that opened in the last two years. Ouch!

The Starbucks indicator is clearly bearish right now (in fact, I don’t even think a bear would drink a cup of Starbucks at this point), and I don’t see it getting any better anytime soon.

But when people do start going back to Starbucks in a big way, it may be a sign that the economy has begun to recover.

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