Starbucks’ Horrible Future

Starbucks Corp. (NASDAQ: SBUX) share prices suggest the company’s best year is well behind it, in 2021. The coffee purveyor has had a revolving door for chief executives since then. Kevin Johnson, Howard Schultz, Laxman Narasimhan, and Brian Niccol have all held the job. Schultz is its proverbial bad penny.

Niccol is the latest CEO experiment. And, after a little more than a year, it has already failed, particularly for those who look at the stock price. In March, it topped $117. Today, it trades at $87. Based on three quarters of earnings and a slew of announcements about planned improvements, investors have lost whatever patience they had.

What Was the Plan?

Niccol was expected to be a turnaround artist due to his track record at Taco Bell and Chipotle. His magic at Starbucks has been a line of statements primarily about how Starbucks might return to its roots as a community coffeehouse where baristas are friendly and well-dressed. When people order, their orders will come fast. The baristas will remember people’s names.

What does Niccol have to show for his plans? He dumped Starbucks operations in China, which was supposed to be its fastest-growing market and eventually, perhaps, its largest. Starbucks sold 40% of its China operations for $4 billion, plus brand licensing and some upside. The buyer was Boyu Capital, which, while local, does not appear to have deep roots in the coffee shop business. It is rare for a company to walk away from such a strategic asset, even if it faces a long repair job.

Without China, most of Starbucks’ future is in the United States.

For the year ended September 29, Starbucks revenue increased 3% to $37.2 billion. Earnings fell from $3.31 a share to $1.63. Niccol made a statement without offering proof: “We’re a year into our ‘Back to Starbucks’ strategy, and it’s clear that our turnaround is taking hold.”

Finally, Starbucks workers plan to strike in 40 cities. This will represent a small number of stores. However, the news has shown up at almost every major news outlet in the country. It is a bad look.

Niccol is the next Narasimhan. And Howard Schultz is the next CEO.

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