Starbucks as the canary in the coalmine?

Starbucks reported a June quarter that was apparently disappointing to the street, with same-store sales only up 4%. They blamed it on an unexpectedly high demand for frappacino as opposed to higher-margin espresso, or something. Apparently it's more complicated to make the frappacino and their baristas just weren't up to it.

Isn't it likely, though, that Starbucks will be a great coincident indicator, or maybe slighly leading indicator, for a recession? I mean, what's the first thing you're going to give up when you need to tighten the belt a little? Rent or mortgage payment? Electricity? Speaking for myself, I wouldn't want to cut back on the roughly $600 a year I spend at Starbucks (that's $1.50 for the small -- "tall", which I refuse to say -- coffee and a $0.25 tip pretty much every day, on the turn of our 3-mile walk). But I guess that would have to be one of the first things to go if the wolf showed up in the neighborhood.

Can't say the past gives great evidence of this (see chart). Sure, there was a good blip down after the dotcom bust in 2000-1, but there've been quite a few of those over the years, none of them really correlated with recession. I even remember people saying back in the bust years that Starbucks was boosted by hosts of the unemployed dotcommers toting their laptops to the local when on their job searches.

In case you're wondering, Yahoo Finance says this stock is trading at a P/E of 44x and a forward P/E of 35x. Amazingly, the company is worth $23.5bn.

Oh, and how much did same store sales go up again? 4%, you say? Does this sound like a growth stock to you, deserving of a multiple like that? With a Starbucks about every three blocks in most of the town in the US?

The only thing against it being a screaming short is that only around 17% of its revenues are in the US. Will the rest of the world follow suit, do you think, and have one on every corner? Well, somehow total revenues for the quarter were up 20%, and that's the target they've set themselves for the rest of the year. 2,000 new store openings, 4% - 7% same-store growth and 20% overall.