Starbucks plans to raise prices for the first time in four years, a newspaper report confirmed Thursday, hoping that loyal customers already willing to pay more than $3 for a tall latte will stick around.
"Prior to the end of the calendar year, Starbucks will be taking a modest price increase," Chairman Howard Schultz told the Wall Street Journal, citing escalating dairy prices, as well as rising rent and health insurance costs.
CNN/Money reported in July that price hikes were on the horizon for Starbucks in its North American stores.
Schultz would not say how much prices would rise this time around. The gourmet coffee retailer last raised prices by 7 cents on average, or 2 to 3 percent, in August 2000, the newspaper reported.
The newspaper quoted customers as saying the proposed hike is "ludicrous."
And two-thirds of regular coffee-house customers said gourmet take-out coffee is too expensive, according to a market survey conducted early in the year by research firm Mintel International Group.
But in a note to clients earlier in the summer, WR Hambrecht analyst Kristine Koerber had said, "We believe the price increases will be met with little resistance by the consumer because the underlying demand for the products has been so strong."
Current pricing pressures could force the coffee chain to raise prices by as much as 4 to 5 percent, or about a dime to the average $2-$2.50 drink, according to the report.
Speculation that a price increase began in earnest when Starbucks (SBUX) saw same-store sales last Wednesday dip for the first time in 10 months on the slowest same-store growth in 14 months, sparking a sharp sell-off.
Officials at Starbucks Seattle headquarters were not immediately available. [b][i]yeah, they never are, are they???[/i][/b] :roll: