Starbucks (SBUX) continues to struggle... Regular readers may recall my June 9 essay about the coffee giant. In it, I mentioned that frustrated Starbucks customers were looking elsewhere for their caffeine fix.
One Man Could Save This Struggling Coffee Chain
By Ethan Goldman, junior analyst, Chaikin Analytics
Starbucks (SBUX) continues to struggle...
Regular readers may recall my June 9 essay about the coffee giant. In it, I mentioned that frustrated Starbucks customers were looking elsewhere for their caffeine fix.
Starbucks' stock has continued to fall in recent months. It's down about 6% since June 9.
You might have heard about the company's new plans to close stores, too...
Last week, Starbucks announced its plans to close about 1% of its company-owned stores in North America.
It also plans to reduce non-retail headcount by about 900 people.
Starbucks estimates that these changes will cost the company about $1 billion. They align with the company's "Back to Starbucks" strategy to revitalize the brand.
But there's one person behind this change that I'd like to discuss...
When news broke that he would be joining Starbucks, the stock surged by roughly 25% in one day.
And the last company he led grew its stock price by more than 900% from when his tenure was announced to when his departure was announced.
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The Hype Around Brian Niccol Isn't Without Reason
On August 13, 2024, Starbucks announced that Brian Niccol would be joining the company as its new CEO.
The market clearly liked the announcement. As I said earlier, Starbucks' stock soared by about 25% that day.
The Power Gauge had given Starbucks a "bearish" or worse rating for the entire six months prior to the announcement. It was clear that Starbucks needed a shake-up.
And Niccol has a history of shaking things up...
In 2005, he entered the restaurant industry by joining Yum Brands (YUM) as a vice president. Two years later, he became the chief marketing officer for the company's Pizza Hut brand.
There, he oversaw Pizza Hut's rollout of a mobile app. Pizza Hut was the first pizza company to create and take orders from an app.
In the first two weeks after the launch, the app boasted more than 100,000 downloads.
Niccol then went on to become chief marketing and innovation officer for Yum Brands' Taco Bell chain in 2011. Under his lead, Taco Bell turned from a 2% sales decline in 2011 to an 8% gain in 2012.
And before Niccol took control of Starbucks, he served as CEO of burrito chain Chipotle Mexican Grill (CMG)...
Chipotle announced the change on February 13, 2018. The next day, the company's stock jumped by more than 15%.
On August 13, 2024, Chipotle announced that Niccol would be leaving the company to go to Starbucks. From the day Chipotle announced that Niccol would be joining the company to the day it announced his departure, CMG shares soared an incredible 927%.
In the chart below, you can see the move higher...
Folks, it's safe to say that Niccol earned himself quite a reputation. He's known for reinventing fast-food brands in exciting ways.
But this doesn't mean that success is right around the corner for Starbucks...
The Power Gauge Is Still Flashing a Warning on Starbucks
It's true that Starbucks is in rough shape. The stock is roughly flat over the past five years. Over the same time frame, the S&P 500 Index has gained about 100%.
Put simply, that's terrible underperformance.
And to be clear, Starbucks gets a "very bearish" rating from the Power Gauge right now – like it did back in June.
But I don't think that it's the end of the line for Starbucks...
Keep in mind that since the day before Starbucks announced Niccol would be taking the helm, the company's stock is still up about 11%.
Niccol has a strong history of reinventing companies in times of need. So investors should take his "Back to Starbucks" plan seriously.
Of course, it will take some time for the effects of this plan to show...
For now, the Power Gauge says it's too early to bet on a turnaround. Our system is still saying to avoid the stock.
But looking ahead, I'll be keeping an eye on Starbucks for signs of a turnaround in the Power Gauge.
Good investing,
Ethan Goldman
Market View
Major Indexes and Notable Sectors
# Hld: Bullish Neutral Bearish
Dow 30
+0.16%
7
16
7
S&P 500
+0.28%
144
248
108
Nasdaq
+0.46%
30
55
15
Small Caps
+0.12%
573
1025
316
Bonds
+0.82%
— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are somewhat Bullish. Major indexes are mixed.
* * * *
Sector Tracker
Sector movement over the last 5 days
Energy
+3.0%
Utilities
+2.18%
Real Estate
+0.7%
Financial
+0.24%
Consumer Discretionary
+0.24%
Consumer Staples
+0.19%
Industrials
+0.03%
Communication
-0.03%
Health Care
-0.53%
Information Technology
-0.82%
Materials
-1.32%
* * * *
Industry Focus
Telecom Services
16
17
4
Over the past 6 months, the Telecom subsector (XTL) has outperformed the S&P 500 by +20.55%. Its Power Bar ratio, which measures future potential, is Very Strong, with more Bullish than Bearish stocks. It is currently ranked #11 of 21 subsectors and has moved up 1 slot over the past week.
Top Stocks
COMM
CommScope Holding Co
BAND
Bandwidth Inc.
ANET
Arista Networks Inc
* * * *
Top Movers
Gainers
WDC
+9.23%
COIN
+6.85%
STX
+5.35%
CSX
+5.35%
TTD
+5.3%
Losers
WSM
-4.65%
VST
-4.48%
CCL
-3.98%
DVN
-3.97%
CPB
-3.77%
* * * *
Earnings Report
Earnings Surprises
MTN Vail Resorts, Inc.
Q4
$-5.08
Missed by $-0.35
* * * *
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