Consumables Monthly Digest today
We are hosting our monthly Consumables Digest call today at 12:30 ET. We will quickly revisit several of our long ideas, including MCD, SBUX, DASH, and others as requested. We will discuss pushback on our recent calls, recap important developments over the past month, share noteworthy takeaways from management calls, and address top client inbounds. We will also have time for questions but will strive to keep the call's length to 30 minutes.
Bernie Whiffed
Howard Schultz came well prepared to take on Bernie, and Bernie didn't have the goods on him.
While the Senate testimony of Starbucks' Howard Schultz during the week was highly-anticipated, the performance of the ex-CEO made it a non-event, but that doe not mean the company labor issues are in the past. Schultz's vigorously defended the longtime Starbucks' culture of treating employees well with his testimony that recounted his humble beginning. He also compared the employee benefits at Starbucks to other retail chains. A new disclosure was that Starbucks now has an average hourly wage of $17.50 per hour. Mr. Schultz acknowledged the workers right to unionize and said the company is prepared to begin the bartering process. Separately, Starbucks shareholders approved a proposal for the company to conduct an independent assessment of its labor practices as it deals with the newly unionized U.S. cafes. Starbucks reiterated that it is now undertaking an independent, third-party human rights impact assessment, which will include a review of the principles of freedom of association and the right to collective bargaining. Unionization was a leading indicator of the company's labor issues, and while unionization may be in the rearview mirror, it does not mean the labor issues are going away.
DIN - rates are going up
DIN entered into a purchase agreement wherein two of the company's indirect, special purpose subsidiaries (co-issuers) have agreed to issue and sell Series 2023-1 Class A-2, Fixed Rate Senior Secured Notes (new notes) in an initial principal amount of $500M. Under the purchase agreement, the new notes will bear interest at a rate of 7.824% annually, up from 4.7% on the Series 2019-1 notes. The co-issuers and their subsidiaries own substantially all of Applebee's and IHOP's domestic franchising, rental, and financing assets and will use the cash flows generated from these assets to make interest and principal payments on the new notes. Net proceeds, along with cash on hand, are expected to be used to repay any outstanding amounts under existing senior notes in full. Transactions are expected to close on or around Apr.17, 2023.
