"World's Biggest Public Toilet" Starbucks Tumbles After Slashing Guidance, 150 Store Closures

It is perhaps poetic justice that not long after Starbucks became one of the world's biggest virtue signalers, when the company decided it would become the world's biggest public toilet in the aftermath of the Philadelphia incident in which two black men were arrested for doing nothing, the company released its most disappointing guidance in years, in which it not only announced it would shutter 150 underperforming stores, and slashed Q3 global comp store sales guidance from +3% to barely positive, ot +1%, but it also admitted that the growth phase is now over, "as the company now expects to return approximately $25 billion in cash to shareholders in the form of share buybacks and dividends through FY20" a $10 billion increase from the cash return target announced on November 2, 2017, and confirmation that NFLX can't even come up $10bn in growth initiatives.

As part of the guidance, Starbucks whose executive chairman Howard Schultz announced two weeks ago he is leaving the company at the end of the month, announced three strategic priorities "to regain revenue and earnings momentum":

  • Accelerating growth in the U.S. and China, the company’s targeted long-term growth markets;
  • Expanding and leveraging the global reach of the brand through the Global Coffee Alliance; and
  • Sharpening the focus on increasing shareholder returns.

Slamming his own performance, Kevin Johnson, Starbucks president and ceo said that "while certain demand headwinds are transitory, and some of our cost increases are appropriate investments for the future, our recent performance does not reflect the potential of our exceptional brand and is not acceptable."

This was followed by more token corporate speek:

“We must move faster to address the more rapidly changing preferences and needs of our customers. Over the past year we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organization and enhance focus on our core value drivers which serve as the foundation to re-accelerate growth and create long-term shareholder value.”

And the full guidance:

Accelerating growth in the U.S. and China, i.e. "praying we can come up with an even more expensive version of pumpkin spiced latte:"

  • The company’s streamlining initiatives will enable greater agility in adapting more quickly to changes in consumer preferences. This includes accelerating product innovation around core beverages while leveraging the growing tea and refreshment category, as well as consumer behavior trends towards health and wellness.
  • Starbucks is optimizing its U.S. store portfolio at a more rapid pace in FY19, including shifting new company-operated store growth to underpenetrated markets, slowing licensed store growth, and increasing the closure of underperforming company-operated stores in its most densely penetrated markets to approximately 150 in FY19 from a historical average of up to 50 annually. In FY19, this will result in a slightly lower growth rate in net new company-operated stores.
  • Starbucks is actively expanding the breadth and depth of digital relationships with current and new customers. The company has added 5 million new digitally registered customers since April 2018 and 2 million active Starbucks Rewards members year-over-year to 15 million, up 13 percent from the previous year.
  • In FY19, the company expects newer digital initiatives to contribute one to two points of comp growth in the U.S., supported by a redesigned Starbucks Rewards program that provides customers more choice around redemptions and payment, as well as expanded personalization capabilities for customers that have a digital relationship with the company.

Expanding and leveraging the global reach of the brand, i.e., closing down underperforming stores and licensing others, while boosting the dividend in hopes investors are distracted enough and not notice the melting ice cube.

  • Starbucks continues to make progress toward closure of the Global Coffee Alliance transaction with Nestlé to accelerate and grow the global reach of Starbucks brands in Consumer Packaged Goods (CPG) and Foodservice, adding opportunity for another 5 million points of presence in 189 countries.
  • Sharpening focus on profitability and increasing shareholder returns
  • With the execution of the company’s strategic priorities expected to improve the return profile of the business, the company now expects to return approximately $25 billion in cash to shareholders in the form of share buybacks and dividends through FY20. This represents a $10 billion increase from the cash return target announced on November 2, 2017.
  • Starbucks is intensifying its focus on G&A efficiency, with plans to partner with an external consultant to drive speed and leverage best practices in identifying areas of opportunity. The company expects to provide more detailed plans in conjunction with the company’s Q3 FY18 earnings call.
  • The company is actively exploring strategic options to license company-operated stores in other appropriate markets.
  • In support of an accelerated return of cash to shareholders, the Board of Directors approved a 20 percent increase in the company’s regular quarterly dividend and declared a cash dividend of $0.36 per share payable on August 24, 2018, to shareholders of record as of August 9, 2018. This represents the 8th annual increase in the company’s regular quarterly dividend.

Finally - literally - at the very end of the press release, was the financial Update:

The company now anticipates 1 percent growth in comparable store sales globally in Q3 FY18. Additional details with respect to FY18 guidance will be provided during today’s Investor Presentation.

This is down from 3% previously. Not surprisingly, the stock tumbled on the news.

Comments

TGF Texas shizzledizzle Tue, 06/19/2018 - 16:36 Permalink

After they went Anti-american, then got called out by the left for not being liberal enough, they doubled down on stupid, and look what happened?

Toxic brand image caused by politicalization, pushed by the CEO, who recently...drum roll please.....

Stepped down, in order to start his currently cloaked campaign for President of the US!

 

No shit, you can't make this shit up, no sane person would believe it!

In reply to by shizzledizzle

Tony 12-Letters TGF Texas Tue, 06/19/2018 - 16:46 Permalink

> start his currently cloaked campaign for President of the US! No shit, you can't make this shit up, no sane person would believe it!

And yet, it's completely unsurprising. It's just old m0ney doing their old m0ney schtick.

"Editor: since the is the first time we have seen the name Starbuck here, it is
worth pointing out the link between Folger and Starbuck. Both big coffee
names, right? You may have assumed Starbucks Coffee houses were named
for Starbuck from Moby Dick. Nope. If so, the name would be Starbuck's, with
an apostrophe, wouldn't it? It looks like they were named for old family
relations, which means the Folger family is probably involved in Starbucks
coffee. It would be too big a coincidence if the two current top market shares in
coffee were names from related families, but were completely independent."

http://mileswmathis.com/coffin.pdf

In reply to by TGF Texas

DonutBoy Leakanthrophy Tue, 06/19/2018 - 17:21 Permalink

How can they close these stores?  It's inhumane.  What are the homeless suppose to do?  Where will they bathe, shit, change needles, and use their Obama-phone WiFi?  Are these store closings distributed properly across racial and socio-economic gradients?  I hope to God this isn't a BlackBucks store closing or part of Trump's war against immigrants.  Fucking capitalists.

In reply to by Leakanthrophy

Endgame Napoleon DonutBoy Tue, 06/19/2018 - 18:31 Permalink

So much for having a place to get away for lunch to get a $2 cup of jo—not the $4 stuff (ever)—when working in stressful, dangerous areas, doing 75 things at once all day long under heavy quota pressure, with your momma colleague absentee and excused for it, leaving you with twice as much work and less than enough money to rent an apartment, even when you never miss a day of work & meet the quotas every month, getting the tiny commission checks. Let me add it up: If I skip the coffee, can I, a single, childless worker, afford a crappy, ugly, one-room apartment with no other indulgences at all: no vacations, no eating out, no expensive clothing, no expensive hobbies, no cable, etc. Answer: nope. SB is closing the stores in the non-posh areas, leaving stores in the posh areas open so that married, bored-with-their-kids moms with big spousal incomes, working part time in the nicer, safer areas of cities to add keeping-up-with-the-Jones’ income can stop there, getting the $4 jo, when they leave work every day at 2:30, exiting the building even though phones are ringing off the hook with paying customers. They are above firing, even when taking off for many, many two-week intervals for baby travel soccer, in addition to mornings & afternoons off (for kids), plus PTO and pregnancy leave, while the childless workers are held to dramatically different standards. Do not get back from SB even 5 minutes past your lunch time. SB guy will run for president on the promise of giving overworked babyvavationers paid family leave, even though their recently doubled $2,000 non-refundable child tax credits could pay for 500 $4 SB pumpkin-spice lattes, while the $6,431 refundable child tax credits of the single moms and immigrants in male breadwinner households with US-born kids who also get free rent, free EBT food, free monthly cash, free electricity and free daycare so that they can work part time to stay under the income limits for the pay-per-birth welfare programs could finance $1,608 pumpkin-spice lattes @ $4/piece.

In reply to by DonutBoy

SheHunter Endgame Napoleon Wed, 06/20/2018 - 01:59 Permalink

Read through your post.  And found it oh-so-true had to login first time in a awhile.  Isn't it the truth.  Those of us who choose not to bring more humans into the overcrowded world are penalized.  Spit out babies and you are rewarded.  Recognize the planet overpopulation and get punished.  It is out judo-christian heritage that continues this farce of more humans is better.

In reply to by Endgame Napoleon

PrayingMantis TGF Texas Tue, 06/19/2018 - 16:49 Permalink

 

   ... 150 stores closing ... if each store averages 10 employees each, 1500 added to the “out of the labor force” tally ... perhaps, a few might even end up pitching another tent on a shit-filled sidewalk tent-dwellers alley ... no matter how we look at it, it’s not good ... 

    ... and the CEOs just continue business as usual ... slaves always suffer ...

 

In reply to by TGF Texas

Utopia Planitia PrayingMantis Tue, 06/19/2018 - 17:04 Permalink

Howard should be forced to fund, out of his own pocket, each closed ADFPT (America's Disgusting Free Public Toilet) store being turned into a homeless shelter.  All the ongoing expenses (rent, lease, etc.), utilities, all the police and emergency services expenses, all living expenses of the homeless, the entire works.  Even with his $$Billions$$ he would be homeless himself in about 6 months!

In reply to by PrayingMantis

Endgame Napoleon PrayingMantis Tue, 06/19/2018 - 18:44 Permalink

Never fear: Most of their employees do not have kids. The only relevant employment statistic in the fake-feminist / womb-productivity-obsessed USA is how many moms are being accommodated to work with layers of government assistance and workplace-absenteeism privileges, while $9-per-hour daycare workers, NannyCams & low-paid babysitters or retired-in-name-only grandparents do the work of raising their kids.

The USA has the biggest generation of young, working-age citizens ever, thanks to all of the pay-per-birth freebies that have accrued to recent generations of citizens & noncitizens for reproducing in single-earner households while working part time to stay under the income limits for welfare and the cut off for refundable child tax credits up to $6,431, and yet, this massive, youthful generation is so underemployed that the SS trust fund is no longer running a surplus. They are not paying in enough to support the other hugely generation: the Boomers.

In reply to by PrayingMantis

mad mad world Tue, 06/19/2018 - 16:36 Permalink

No worries, Schultz is running for the POTUS and by some odd chance that he wins. He'll sign an EO to mandate everyone to drink from the biggest toilet aka Starbucks.

Btw, Starbucks sells over priced shyt drinks.

Expat Tue, 06/19/2018 - 16:40 Permalink

LOL.  Trumpturds dissing one of their few potential employers.  You assholes have no skills or education so if you don't make latte's you will have to mop floors (psst, that's the flat surface you walk on.).