Starbucks made a new announcement this week that will impact the way employees interact with customers, but will it move the needle as far as the company’s stocks? Doug and Lee share their thoughts.
Doug McIntyre: Lee, one of the dumpster fire stocks in the whole US market is Starbucks. Now, they keep coming up with brilliant ideas to try to fix the company. The newest one is, is that they’ve prepared a script for the baristas to use to try to make customers think they’re more friendly, more competent, whatever. That was after giving them uniforms, telling ’em they could only wear certain things, cutting back on the number of drinks that they were gonna serve, making the stores more user-friendly. I mean, these people, they do everything but increase same store sales.
Lee Jackson: If you figure out a way to do that, the stock would probably respond. Yeah. I mean, you know, the Starbucks barista is, you know, as some sort of modern day mixologist that got more status, I guess, than they ever deserved. And I, and I think part of the quirky nature of it is what a lot of people, I guess like, but I can’t believe that any of these where Starbucks has fought so hard against any sort of union representation, I can’t see that any of these are gonna go over real big with the folks that worked there.
Doug McIntyre: Starbucks is a mess again, you know. Howard Schultz, who was sort of the founder, was the CEO for many years, most of the years he was there, they did very well. You know, he replaced the CEO at one point and he came in as the interim CEO again, he replaced another CEO came in as the interim for a second time. And it seems to me that the board made a mistake by, you know, hiring yet another person to do this. Because the stock is just junk. It’s poor performing again, you know, it remains up against McDonald’s and Dunking Donuts. The price of, uh, coffee beans. All time high to some extent because of droughts in places like Brazil and Vietnam. And listen, I understand that they have a hedging program just like the, you know, airlines hedge jet fuel. Sure. But you know, you can never get around crummy management and a crummy company. I don’t care if you’re not at a hedge, you’ve gotta look at companies. What is their primary business? Starbucks is a coffee store. They’re no good at it. It’s a bad stock. Stay away from it. Period.
Lee Jackson: Yeah. This is not some sort of value play ’cause you’re gonna get a big turnaround because it’s like, you know, fixing Starbucks is, is like turning around the Titanic. You know? It’s just like it can’t be done in six months and after building a brand that was so strong for 20 years, I mean from like 1990s on up to 2010 or so, they absolutely dominated that business, but they did what everybody does. They expanded too fast, you know, too many branches, you know, too many shops, too many that were close to each other. I mean, in Dallas, I’d drive by one going to work, and then, you know, there’d be a new one built there in in the next year and then and down the street, another one. And I’m like, geez, I think there’s more than what we need here. But now you just can’t put that genie back in the bottle. You just can’t do it.
Doug McIntyre: No, they’re not gonna start. Matter of fact, guess what? In the last quarter they added stores. They have another problem. And that is that they always said, “Look, we have to do well in China. It’s like everybody else. We’ve gotta do well in China.” There’s a company there called Luckin Coffee, right? Which now has about three times as many stores as Starbucks has. Starbucks is now being crushed by them and Luckin Coffee just opened its first branch in the United States. So I’m not saying that there’s gonna be a tsunami of Luckin Coffee coffee stores, but it’s just an example of the fact that they’re not by themselves. There are a lot of people in the coffee shop business.
Lee Jackson: Yeah. And especially when it’s gotten to the point that it, it, it, you know, Starbucks had a little rebirth about 10 and 15 years ago. When all the kids, the teenagers started drinking the, the super sweet sort of, you know, they’d get the caffeine buzz, but it was sweet, like they were having a dessert and I think that carried ’em for, you know, five years or so, maybe even 10 years. But I mean, those drinks are expensive now. And you know, it, it’s not two or three bucks, it’s five or six bucks or whatever they are. I don’t, I haven’t been in a Starbucks in years, but you know, that kind of fad has gone away. So, you can only have pumpkin spice season in the fall. So apparently that helped a little bit, but yeah, they have systemic problems that Brian Nicole’s not gonna be able to fix with uniforms, scripts, you know, items like that.
Doug McIntyre: Well, the last thing I’ll say about Starbucks, and this is obviously something that’s an observation from going to 15 stores like I do, is they run out of food. Because if you go to McDonald’s and you say you want a hamburger, you’ll get one at seven in the morning or one o’clock you’re gonna get a hamburger. At Starbucks you go in, “Well where’s my cheese sandwich?” “Oh, you know, we, we ran outta those.” Or they didn’t send them today. So it’s also a badly run company. So that’s all I’ll say.
Lee Jackson: My recommendation is don’t buy it. Maybe don’t short it, you know, because we’re not, we’re not short seller geniuses. But I would be away from it. There’s other coffee companies and, and other ways to play that. And Dunking Donuts, you can, I mean, play McDonald’s. I mean, but anything but like you said, this is gonna take a while to fix.
Doug McIntyre: It is.
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