Starbucks -- Continues To Resonate With Me -- May 2, 2024

Locator: 47034STARBUCKS.

This story continues to resonate with me. Continues to "bother" me. Can you imagine paying $8.40 for a regular coffee and a piece of bread. The CEO yesterday stressed the need for the company to "remind" folks of the "value added" that Starbucks. 

Years ago, Starbucks really did provide some "value added." But no longer. What's the "value added" in Starbucks these days. Most folks pick up their order and take it elsewhere. Folks are not "living" in Starbucks any more like they used to. Driving through to pick up a regular cup of coffee and a piece of break for $8.40 just seems crazy. 

The CEO can talk all about "value added," but bottom line: prices need to come down. And Starbucks will have huge problem with cutting prices. 

However, having said that, if the CEO can turn Starbucks around it will speak volumes about the resilience of the American consumer.

I'm not holding my breath.

The Cramer interview here.

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Previously Posted

Story of the day: Starbucks. Today, ticker -- worse day in almost two years. Right now, down significantly, nearly 20% in one day. Worse earnings miss in company's history. Second consecutive quarter with negative earnings; hasn't happened since the Covid lockdown.

Jim Cramer actually used the word "existential" when interviewing the Starbucks CEO this morning. Jim Cramer: "Is Starbucks coffee simply too expensive?" Wow -- hard-hitting interview. A must-watch interview. Will probably show up later today. Wow, Cramer was irritated. Wow. Amazing interview. Three huge headwinds: high prices; slow app order completion; boycotts in Mideast. 

Ticker: since Narasimhan became CEO:

• SPX: up 28.75%
• SBUX: down 21.86%

I go through phases. About a year ago I was going to Starbucks regularly and but then quit abruptly and completely. I haven't been in a Starbucks for at least a year. For me it simply got too expensive. The loyalty reward program was a joke.

Exhibit A: when flying to Portland, I used to stop at Starbucks to get a black coffee and a plain, not-particularly-tasty butter croissant -- price -- $8.40. That's unpalatable. $8.40 for a coffee and a croissant.

If a plain, regular-size coffee and a plain crosissant is costing $8.40, I would assume a "specialty" coffee and a real "entree" would trend toward $15. Carl Q and Cramer drink coffee made at home; David Faber, $2.00 coffee at nearby subway location (not Starbucks).

But Cramer brought up the other headwinds.

At the airport (and at the local Starbucks, for that matter, also) service is incredibly slow. At the airport, folks are standing around five to ten minutes (?) after placing their order -- and that's after standing in line. It really is incredibly slow. For a coffee and a croissant. The CEO admits there is a big problem with folks using their Starbucks App to start and order and then not complete it because it simply takes too much time.

The CEO broke down his customer base into three groups: the casual visitor, the loyal customer (me, a year ago); and the super-loyal customer.

The casual visitor is disappearing; the loyal customer is quickly becoming the casual customer. The question not asked: what percent of the customer base is the super-loyal customer and to what extent are super-loyal customers "buying down."

Boycotts. I had not given much thought to the Starbuck boycotts in the Mideast but with the recent dust-up in NYC (Columbia University) one must reconsider exactly how severe the "Mideast" boycott might be worldwide. I can't imagine those Hamas / Palestinian protestors in NYC stopping by Starbucks on the way home from the protests.

Anyway, enough of this. But $8.40 for a coffee and a plain croissant. Head-to-head at PDX, a Starbucks coffee/croissant for $8.40 vs an incredibly remarkable (in comparison) Big Mac meal for $9.25.

I can't imagine Starbucks prices coming down much: