I just read that Macy’s is laying people off. Starbucks is also going to start to lay off people. Now we all know Starbucks will never fail I don’t see how it could. They are just laying off people to cut costs and make a bigger profit. By laying these people off they won’t have enough money to do things they once did like go out to eat. Since they can’t go out and eat as much Restaurant A has to layoff people who then in turn can’t go out as much as they did, you get the point. My simple question is are the companies that are laying off people even in risk to fail?
We know no such thing. Any company can fail. If, as seems likely, they have falling sales then they must either reduce costs, run at a reduced profit or a loss, or act to increase sales somehow. They’ve gone for option 1, presumably judging that option 3 is not in their power in a recession, and option 2 is unpalatable.
Of course, but if they lay off more people than necessary to provide adequate service to their customers they will go under too. Note that they are closing whole stores, not just reducing staff in existing stores.
Some are. Others are not at serious risk of outright failure per se, but want to maintain their profit margins and share price, as any public company is required to do.
In this climate, businesses have to cut costs and, unfortunately, layoffs and store closings are the quickest way. Businesses are aware of the ripple effect, but ultimately if you don’t have the income to pay your employees, you’re in danger of having the whole company go under. No one is going to fail and put 10,000 people out of work when by cutting 1000 they improve their bottom line. Sucks for those who lose their jobs, but it’s better for more people if the company stays afloat.
Read this:
http://online.wsj.com/article/SB123367018137943377.html?mod=WSJ_myyahoo_module
There’s some serious shit going on out there. In a major manufacturing area like autos, single digit fluctuations are a big deal. All of these manufacturers are seeing multiple double digit falls. That’s huge! How do you think this affects your local auto dealership and everyone else in the industry? If people are not buying cars do you think they are going on shopping sprees at Macy’s?
Starbucks can’t fail? Would you like to put money on that? They aren’t after bigger profits, they’re after any profits.
Read Spartydog’s link, then get back to me.
Another point to consider is that even if Starbucks as a whole is doing well, individual stores may not be doing so, depending on the local business conditions. Suppose there was a Starbucks across the street from Lehmann Bros. or Bear Stearns. I’ll bet they wouldn’t be doing too well.
The parent company can’t afford to operate local franchises that are losing money. If there’s no sign of a turnaround in a particular store, yes, it will be closed - to avoid it and others in the same losing situation from becoming a bleeding sore on the company.
Yeah, Starbuck’s isn’t exactly a paradigm of financial health at this point:
With a P/E of 42.36, I think it’s overpriced at $10, even down from almost $40 two years ago.
:: reads linked article ::
It’s worse than I thought. I read today that Chrysler was offering buyouts to all its employees. And more cars are selling in China than the US.
Since less people are coming in to buy coffee, they don’t need as many people on shift at the same time, hence layoffs.
You seem to think that a company should lay people off only if it must do so to avoid failing, and that it’s somehow bad for companies to lay people off just to make more money. But that’s not how it works. A company is an organization where the Board of Directors and CEO and CFO etc. etc. run a business using other people’s money (those people being the shareholders. The people that run the business have a legal duty to maximize the amount of money the shareholders make. Therefore, if they believe that laying people off will maximize the amount of money the shareholders will make, then they have a legal duty to do so, even if it is not the case that layiing people off is the only course of action that would avoid the business’s failure.
There’s one thing I’ve been wondering about the economic downturn and all the layoffs I keep hearing about every day-how will it be possible to ever recover? I mean, the the economy is so poor right now that people aren’t spending much money. As a result, many companies are laying off thousands of employees and some may even have to shut down. But due to all the layoffs and closings, there will be even fewer people spending money which will result in even more layoffs and more businesses being closed. Which will result in even more unemployed people, which will result in less spending, and so on. How is it going to be possible to stop this continuous cycle before the whole world is shut down? I know that companies have to layoff employees to keep themselves from failing, but the more people that are laid off, the worse the economy will become, right?
I guarantee you there are companies that are currently profitable that have or will engage in layoffs, either to clear out employee dead weight, or to drive up the stockprice a fraction of a cent. Now’s the perfect time to do it when you can plausibly claim it was because of the economy.
At some point an equilibrium is reached, interest rates and wages find a balance and everything starts to move forward again. The inefficent companies tend to go first. Leaner, harder, better run ones will keep producing the things we need. Like it or not, starbucks could disappear tomorrow and in a few months it would just be another fad that failed. In some ways Starbucks would be a good example of a business that should die in hard times. Its purely a luxury convenience product, and expensive considering you can do it yourself at home for a small fraction of the cost, and it requires minimal skills and preparation.
I don’t know; I just tried to make a cappuccino at home with my roommate’s espresso machine and nearly killed myself. In the future I plan to delegate the duty to professional baristas or reconcile myself to French-press coffee.
Even without attempting to apply any serious rigor to your analysis of the company, what’s your common sense approach to concluding a company that sells $5 cups of coffee wouldnt have problems in a deep recession? I cant think of any indulgence easier to cut out in a time when consumers are spending less.
Especially when “cut out buying a coffee on your way to work” is usually in the top three of any newspaper article entitled “10 tips to beat the credit crunch” :).
For many of these companies, not in the near term. The point of the layoffs is to keep “not in the near term” going as long as possible. You don’t do that by keeping things business as usual and wait for profits to go completely in the shitter before making a change.
Correction: Any company can fail except GM, Ford, Chrysler, AIG, Lehman Brothers, et al.
Not to mention the Starbucks across the street from the Starbucks, which is not an exaggeration in many places.