Join Hedgeye's Restaurants Team – led by Howard Penney – for a Black Book presentation on Starbucks (SBUX), which remains on our Best Ideas List as a Short. The call will take place on Wednesday July 19, at 1 pm ET.
Email sales@hedgeye.com for more information.
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There is a growing body of evidence that refutes consensus thinking on SBUX. Join us as we highlight the consensus bull case - and then present evidence that will highlight significant holes in many aspects of the bull thesis.
KEY DISCUSSION POINTS:
The bull case consensus on SBUX:
- SBUX is an unparalleled growth story in the consumer space.
- Beverage innovation will help drive mid-single digit same-store sales growth.
- Food innovation will drive food as a percent of total revenues from 21% to 25%.
- Digital innovation and mobile order and pay will drive incremental visits.
- High-single digit global unit growth and China will last a lifetime.
Holes in theSBUX bull thesis?:
- Many of the components that drove mid-to-high single digit SSS are decelerating and in some cases don't exist anymore.
- Historical traffic growth is a misleading number. What happens if traffic is negative in 3Q17?
- The April 2016 change in the loyalty program may have altered how consumers use the Starbucks brand. Will aspirational consumers use the brand less often?
- The recent "beverage innovation" is increasingly relying on gimmicks and sugar to drive awareness. The sugar police targeted soft drinks, what's to stop them from going after SBUX and damage the brand?
- SBUX Americas has used price/mix aggressively as a driver of same-store sales growth since FY15.
- With a slower pace of same-store sales, unit growth will need to slow in FY18 or FY19.
- Howard Schultz appears to once again be leaving at an opportune time in SBUX's business cycle, but there are growing concerns regarding his replacements ability to lead a retail company.
- Leadership's hubris in regards to both independent and QSR competition is unhealthy for the SBUX organization.
CALL DETAILS
Ping sales@hedgeye.com for more information. Please note if you are not a current subscriber to our Restaurants research there will be a fee associated with this call.
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