Will Starbucks Be able to Increase Its Profits?
Will Starbucks Be able to Increase Its Profits?
The article “Starbucks 3Q Profit Climbs 9 Percent” by Jessica Mintz provides detailed overview of main reasons which has led to significant increase in Starbuck’s profit and company’s further steps. Due to apparent improvements the company is planning to open new locations across the country the next year, even despite the fact that the company would hardly handle the growing traffic in domestic stores. The second and third quarters of the current fiscal year are marked by slight improvements and analysts seem to be really satisfied even when the growth is not far from zero point. A rise in traffic is marked as 5% and, thus, the company is planning to expand abroad and to open new stores in 2008. Compared with the previous year, the sales at Starbuck’s stores are 4% higher.
During the conference with investors Starbucks tried to prevent suggestions not to expand abroad as the competition with McDonalds and Dunkin’ Donuts would be very hard. To defend that position Howard Schlutz, Starbuck’s chairman, announced that “as long as we can continue to drive that experience and differentiate ourselves from all others, we will continue to be the leader”. According company’s financial survey, the profit of Starbucks has risen up to 9 % ($158.3 million) compared with the previous fiscal year. Total revenue (included fresh lattes and coffee bags in groceries’ stores) increased up to 20% or up to $2.36 billion, whereas the previous year the overall revenue from coffee industry amounted $1.96 billion. Starbucks has managed to generate revenue of $2.01 billion current year and $1.66 billion the previous year. One of the reasons is that the company’s drink prices rose up to 9%. However, it is argued that such increase would hurt sales as no drop-off is expected. In 2008 the company expects to increase its revenues up to 18%, though this year they expected 20% growth.
Time Warner: Success or Failure?
The article “Harry Potter Box Office Magic Can’t Save Weak Time Warner Q3” by Seth Sutel analyzes Time Warner’s current financial position paying special attention to new ways of profit generating. Sutel writes that Time Warner announced that Harry Potter movie helped media “to meet Wall Street expectations”. The company is known to own also CNN, HBO, Times, and Warner Brothers. Nevertheless, the company’s earnings dropped up to 53% this year and amounted only $1.09 billion. However, if not to measure amortization and depreciation, the company’s income rose up to 9% or to $3.2 billion.
The primary income contributor is Time Warner Cable because “it absorbed new subscribers from bankrupt Adelphia Communications and signed up more customers for premium services including digital phone and high-speed Internet”. Nevertheless, the Cable is reported to loose more than 80,000 basic video customers as they found cheaper to acquire new systems in Los Angeles and Dallas. Company’s income from movie production is also volatile as a box office suffers from misses and hits, but due to “Harry Potter” and “Oceans 13” the earnings jumped up to 71%. Nevertheless, even Harry Potter failed to increase overall profit which is reported to drop up to 23%.
According to financial survey, “advertising revenue rose just 13 percent in the quarter, a decline from the 16 percent increase in the second quarter and 46 percent growth in the same period a year ago”. Despite apparent difficulties, Time Warner continues to fight, though it expects growth of online advertising to drop in the 4th quarter of the current fiscal year because it is difficult for company to win price competition for displaying advertisements. Time Warner said that the pressure is too high and it is expected to continue further even the next year.
Music Sale on Top
The article “Viacom 3Q Profit Jumps on Music Sale” by Seth Sutel discusses Viacom’s increase in revenues in regards to showing successful summer film “Transformers” and sale of music publishing business, as well as provides in-depth analysis of corporation’s financial positions. The author is tending to identify whether the company is stable and is able to compete with other movie production corporations. It is known that Viacom Inc. is a media conglomerate which property amounts Paramount Pictures, Comedy Central and MTV. Additionally, the company is the official owner of cable channels including Nickelodeon and VH1. Sumner Redstone controls Viacom’s shareholder vote.
According financial survey, Viacom’s earnings amount more than $640 million in 2007 compared with $356 million in 2006. Important contribution is made by the sale of Famous Music. However, the revenues were expected to exceed $800 millions or 59 cents per share. Sutel writes that the positive moment is that “Viacom’s Class B shares rose $1.17, or 2.9 percent, to 25 close at $41.58 Friday”. One more moment to mention is that Viacom was earlier combined with CBS Corp., but the companies decided to split up in 2006. The reason was to allow foreign and domestic investors to value promising Viacom’s cable network separately from CBS. The company has managed to keep her position and its shares are being traded nowadays at the same levels as they were traded before the split-up. It is argued that “Viacom’s filmed entertainment division swung to a profit of $71.7 million in the latest period from a loss of $7.8 million a year ago as revenues jumped 57 percent”. Summing up, despite certain difficulties and hard competition Viacom Inc has all chances to appear on top.