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Starbucks (SBUX) Short Thesis:
- Is the CEO ready for the Big Show? Time will tell if Laxman Narasimhan is the right choice as CEO of SBUX. Suppose we use the performance of (RKT.LN) while CEO as a proxy; the jury is still out. Laxman was appointed CEO of RKT-LN on September 1, 2019, and the stock has underperformed the FTSE since then. The reason SBUX hired him - "His understanding of our culture and values, coupled with his expertise as a brand builder, innovation champion, and operational leader, will be true differentiators as we position Starbucks for the next 50 years, generating value for all our stakeholders." Working in the shadows of Howard Schultz can't be easy. What about executing "flawlessly" on Howard's plan to fix the company?
- Accelerating estimates into a recession: Accelerating guidance into a recession - the company now sees annual growth in adjusted EPS of 15-20% for FY23-25 and annual global comparable sales growth of 7-9% over that time, leading to global revenue growth of 10-12%. They raised its forecast in the USA: The company now expects annual U.S. comp sales of 7-9% from 2023-2025, up from a previous forecast of 4-5%. China comp sales, meanwhile, should grow 4-6% annually over that time frame, with net stores growing 13%. The company expects "progressive" expansion in operating margin in the long term, with yearly growth. FY23 will likely prove more challenging than the company is guiding.
- Changes are likely to take time to positively impact financials: So many changes - a new CEO and other significant management changes; modernizing equipment in its coffee shops to improve efficiency; a new brewing system that can prepare a single cup of coffee in 30 seconds; it is adding a new Siren System for the preparation of cold beverages; expand its loyalty program to the metaverse, or web3. Starbucks also announced more changes to its labor model. The company is also focusing more intently on store managers, adding leadership training and tools to help with scheduling and decision-making. All are much needed to changes like these don't happen overnight.
BYND Management
According to a preliminary report, Doug Ramsey was arrested on Saturday night on charges of terroristic threatening and third-degree battery at a parking garage near Razorback Stadium following a football game between Arkansas and Missouri State. According to the report, Ramsey bit another man's nose as part of an altercation in the parking garage. Ramsey was named COO of BYND in Dec 2021 and was paid $18 million in total comp.
Instacart IPO
Instacart said not to issue new shares in its initial public offering, and instead, most of the listing will come from selling employees' shares. According to a WSJ report, the company told investors in recent weeks about its plan for IPO that will allow Instacart's staff to cash out some of their stock. The news comes after a WSJ report in late July that Instacart (ICART) was targeting an IPO before the end of the year. Instacart is still leading toward a traditional IPO rather than a direct listing, which it had previously considered. In May, Instacart (ICART) said it confidentially filed a draft document for an IPO of the grocery delivery company.
