US economic activity deterioriated more rapidly than expected during the quarter.
– Scott Davis, Chairman and CEO, UPS
We see no signs of economic strengthening in the second quarter.
– Kurt Kuehn, CFO, UPS
Contributing to the softness in revenues for the quarter was a mid-single-digit decline in U.S. comparable store sales, driven by decreased traffic. Of note, the California and Florida markets, where consumers have been especially impacted by the effects of the downturn in the housing market, account for 32 percent of Starbucks U.S. retail revenues and 31 percent of its U.S. company-operated retail store portfolio.
– Starbucks Press Release, April 23
…. [US] comparable sales for March were slightly negative….
What did we learn this week? People are cutting back on lattes, they’re cutting back on Big Macs and they are shipping less packages.
To be more specific, on Tuesday McDonald’s reported their first US monthly same store sales decline in years. To be fair, they did say April will be up 2-2.5%. But I still think this is notable.
Yesterday, Starbucks said that US same store sales will decline in the mid-single-digits. That’s big. Last quarter they reported their first ever decline in US same store sales of -1%. Seems like things are getting even worse. Some of this is company specific – but much of it is related to the economy, in my opinion.
UPS also reported yesterday that average daily package volumes were down slightly in the US year over year (from 13.29 million a day to 13.25 million a day).
This kind of stuff is worth paying attention to in my opinion. Do you eat at Starbucks and McDonald’s? Do you ship with UPS? These are bellwether companies that all of us use. If they’re struggling, it means consumers are pulling back and business activity is slowing.
Disclosure: Top Gun has no position in McDonald’s (MCD), Starbucks (SBUX) or UPS (UPS) shares.