Starbucks Insider Spills The Beans After Another Earnings Fail

Remember when Starbucks was the king of coffee, the undisputed champ, like The Rock in his prime? Well these days, it’s more like an old wrestler trying to relive the glory days. A Starbucks insider recently commented, "Starbucks looks like a shell of its former glory—fixable, but it will take time." Harsh, but let’s be real, they aren’t wrong. 

The latest earnings report for Starbucks? Let’s just say it’s uglier than a barista’s apron after a frappuccino disaster. Transactions in North America dropped 6%. International sales fell 7%. And China’s sales were down 14%. It was their second straight quarter of sales declines. In other words: Fewer people are going to Starbucks for $6 coffees and lemonades.

Management tried to sprinkle some sugar on the situation, pointing out a 4% increase in cold espresso sales. But Wall Street was about as impressed as I am with their stale breakfast sandwiches. Over the past two years, Starbucks stock is down 9%, while the S&P 500 is up 35%. 

One analyst summed it up this way: “Boycotts, price resistance, unionizing, or in-store operations? We haven’t found a unique answer, suggesting all (or none?) of these reasons are causing the slowdown.” Translation: It’s a mess, and no one has a clue. 

Zoom out a bit, and you’ll see Starbucks has tanked 21% in the last five years. Aging Founder Howard Schultz, who just can’t seem to let go, has been publicly undercutting his successor, Laxman Narasimhan (trying saying that out loud three times). Schultz’s crazy antics on LinkedIn and Narasimhan’s cringe-worthy live TV interview with Jim Cramer haven’t helped. It reminds me of watching my son in the three legged race at school last year. His partner kept tripping over himself and tripping my son. 

Oh, and there’s also the brewing battle with activist investor Elliott Management. Elliott gobbled up a huge chunk of Starbucks stock and wants changes, including more board members and better oversight. Starbucks hasn’t responded yet, but Narasimhan describes the talks as “constructive.” That seems like corporate talk for “we’re still figuring this out.”

Here’s the bottom line: Starbucks is floundering. Schultz probably needs to step away completely, and let the new leadership take charge without his shadow lurking over every decision like my kid every time I dip a fresh bowl of ice cream. It would also do them good to focus on the thing that made them top dog in the first place—Coffee. Who knew? 

Enough with advertising every lemonade flavor under the sun and trying to sell me wanna be eggs. They need a cultural reset, recognizing that the world doesn’t revolve around their Seattle headquarters. Rivals like Dutch Bros are brewing better, faster coffee for less, and they're starting to pop up all over the place.

 Although still small in comparison, Dutch Bros momentum is not something Starbucks can choose to ignore. 

(Source: ncn) 

To turn this around, Starbucks has to face a harsh reality. They’re no longer the high-flying growth company they once were. Investors need straight talk and customers need a simple menu. Until then, Starbucks’ stock will likely stay as cold as a neglected nitro brew.

Stocks.News holds positions in Starbucks and Dutch Bros.