Starbucks ($SBUX) – Activist Investor & More – July 20, 2024
Famed activist investing firm Elliott Management has taken a stake in Starbucks. The stake was called “large” by multiple news outlets, but the specific amount was not yet publicly disclosed. The position could have been started as early as April, and they could always quickly exit like they did with Paypal. For the last several weeks, Elliott has been “privately engaging” with Starbucks leadership on a plan to turn the stock and the company around.
I think this news should be cheered by all shareholders. Starbucks is a ubiquitous global brand with a still lengthy runway across key markets including North America. It’s a powerhouse that dominates preference rankings for both young and old generations, but just has not executed well lately. There is significant low hanging fruit to improve performance and this is the perfect time in the macro cycle for an activist to get involved and enjoy the recovery. Buy when there’s blood in the streets. That’s what Elliott is doing.
There’s so much potential here. Its stores really only service part of the day, with significant opportunity to round out the daypart skew. It’s actively pulling costs out of its model, trimming fulfillment time to improve throughput, improving communication around deals and promotions and beginning to see improvements. Things should begin to look a lot better later in the year, but to me, Elliott materially improves the odds of that actually playing out. This is an adult in the room with a sterling reputation that is to be respected. It’s a firm with countless examples of providing clear roadmaps for improvement, and I truly hope Starbucks listens closely. Great news for this company’s shareholders. Listen to Elliott.
- Starbucks and Mercedes-Benz will install EV charging stations in some U.S. stores.
- Evercore ISI downgraded the company this week to market perform. It cited earnings estimate pressure due to traffic trends in North America and China. Fallout from the awful Q1 continues to unsurprisingly unfold. Morgan Stanley also called out same store sales concerns in China as competition continues to intensify in that region. The quarter is probably going to be ugly again, but everyone already knows this. Expectations could not be lower.
