It's a long road
Is the new SBUX CEO set up to fail?
At the recent SBUX analyst meeting, the company gave updated guidance of annual U.S. comp sales of 7-9% from 2023-2025, up from a previous forecast for 4-5%? Historically, between 2015-2019 traffic SBUX North America traffic increased by only 1%, and average check increased by 3.8%. The new guidance of 7-9% suggests a significant increase in traffic, given that the average check is up 40% over the past two years. Last week, the Starbucks Partners TikTok account (the company's official account dedicated to employees), who are officially referred to as "partners" revealed an early prototype model of its Siren System Cold Bar. The same system they showed analysts at the analyst meeting. If you didn't see the analyst meeting, watch the video and decide if this is the vision for how you see the company improving throughput. Importantly, the comments posted to the video are also very revealing; most are skeptical, and you also have the creator's response to those concerns. As the TikToc Creator said, "we are still in the early days of testing! Just completed an incubation test and will move into the next phase of testing in the coming year." The company's history of successfully rolling out new technology is spotty, so they have all of FY2023 to test before the rollout in 2024 and 2025 more broadly.
The success of the Siren system is critical to the SBUX story. John Culver, Group President, North America and Chief Operating Officer, Starbucks Corp. said at the analyst day "I told you it was a game changer for us, right? And truly, this is the future for us as it relates to the Siren System, how we deliver both cold as well as hot beverages, and then complement that with food and food warming. So a huge unlock for our partners. It's a huge unlock for our customers and it's a big win in helping us become more effective and more efficient in doing our jobs to serve our customers every day. And it clearly demonstrates our ability as a company to lead, to challenge ourselves, to challenge the status quo, and to really reinvent for the future as we think about the possibilities that exist."
Presenting this technology as the great unlock for the company before it's been thoroughly tested is a high-risk proposition. What if it doesn't work? What is the backup plan or are they going to roll this out regardless of how it tests? The company rolled out "mobile order and pay" before it was vetted and it ended up being a disaster for the company. Will history repeat itself?
BOWL
Bowlero Corp. announced that it has completed three more acquisitions from its pipeline of definitive agreements in 2022
On the West Coast, Strikes Unlimited is a 50-lane center in Sacramento, CA, with arcade games, an on-site pro shop, and home to the Halftime Bar and Grill. Super Bowl Family Entertainment Center, located in Wisconsin, is a 48-lane center featuring arcade games, blacklight bowling, leagues, and a sports bar and grill. Additionally, located minutes away from downtown Milwaukee is JB's on 41. With ten private luxury suites, 35 modern bowling lanes, 40 arcade games, and much more, this location is a nationally and locally ranked top bowling and entertainment destination. Marks the company's 10th, 11th, and 12th completed acquisitions of 2022
BJRI, Not a disaster
We are staying SHORT BJRI. The future is not as rosy as the company said on the call.
BJ's Restaurants (BJRI) 3Q22 GAAP EPS of -$0.07 beats by $0.18 (The 2022 Q3 net loss and diluted net loss per share include a $4.1M, or $0.18 per share) and revenue of $311.3M (+10.4% Y/Y) beats by $7.66M. Adjusted EBITDA of $15.2 million, compared to $16.4 million. Comparable restaurant sales increased by 8.9%, beating FactSet's 6.2%, Cost of sales was lower than FactSet by (10bps); restaurant margin above consensus by +30bps, Operating margin above consensus by +70bps. Due to construction delays, two restaurants previously expected to open in 2022 are now scheduled to open in Q1 of 2023. The long-term target remains to operate at least 425 domestic BJ locations.
