Starbucks (SBUX) has been on the resurgence in the last year and a half, with sales picking back up and shares racing up +240% since the March 2009 lows �C almost five times better than the broader market. SBUX stock shows no sign of slowing down either, with Starbucks up about 22% year-to-date while the market is essentially flat.
Part of the reason for Starbucks�� success recently is a commitment to reinvent the coffee shop. From the SBUX retail sales push with its Via line and other packaged Starbucks goods to the first ever Starbucks dividend, the company has been trying to reconnect with consumers and investors alike.
The latest effort from Starbucks is free Internet access for its customers. The company announced on Monday that starting July 1st and Starbucks would make the transition to free Wi-Fi access. Not only that, but they will also be launching the Starbucks Digital Network in a partnership with Yahoo! (YHOO), a web portal that will include job searching tools for Starbucks customers. Users who access the internet through Starbucks locations will have access to local news content from AOL (AOL) in addition to access to paid content at other business’ web portals, including News Corps’ (NWS) The Wall Street Journal, and Zagat. Users will also have access to exclusive content on Apple Inc’s (AAPL) iTunes service.
One of the most important factors that led to Starbucks’ heavy consumer foot traffic over the past decade was the company’s early adoption of publicly available wireless internet. Starbucks partnered with AT&T (ATT) to offer laptop, PDA, and Blackberry toting caffeine addicts could access the internet for small fees. The problem for Starbucks has been consumer’s unwillingness to pay access fees at public Wi-Fi hotspots. Barnes and Noble (BKS),! a Starb ucks partner itself, has offered free Wi-Fi access through AT&T since July 2009, but Starbucks has been reticent to introduce the service to independent locations. With more and more competing food chains like McDonald’s (MCD) offering free Wi-Fi, Starbucks’ hand has been forced.
Providing free Wi-Fi access at all of their locations should help improve Starbucks’ customer traffic, especially in urban centers, and subsequently improve the overall health of the company. For Starbucks stockholders, the new initiative should help make stock in the company a more attractive proposition in the coming months.
The deal should also excite Yahoo stockholders. As we wrote about just last week, Yahoo is aggressively redefining its brand in 2010. This partnership with Starbucks, in addition to their integration of functionality with popular social networking services Facebook and Twitter, should help make Yahoo stock more appealing by 2011.
As the recession kicked into gear, the closure of 900 separate Starbucks stores and the cutting of nearly 10,000 non-retail and unfilled positions within the Seattle coffee giant’s corporate structure showed that change was in the works for SBUX stock. Though Starbucks stock, has certainly not regained its late 2006 peak before its breakneck expansion plans were frozen and scaled back, the addition of Wi-Fi among other moves may be just what SBUX needs to get back on top.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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