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Wrap UpStarbucks (SBUX - commentary - Cramer's Take) is still living in a world of "ethically sourced and roasted coffee" and providing a unique experience. Mr. Howard Schultz, please wake up and smell the coffee. You are running a business not a commune and your business is in trouble. Management needs to face the reality of the fact that consumers are abandoning SBUX in favor of McDonald's (MCD - commentary - Cramer's Take) and Dunkin' Donuts. Just today MCD reported global comp sales increases of 8.2%, and I guarantee you that part of that surge was coffee, tea and breakfast sales coming from SBUX customers.
Rather than use its cash flow to repay debt, SBUX borrowed more money (on a net basis) in 2008 to buy back stock. Hopefully the new CFO will have some good fiscal sense, because it seems that the departing one failed to de-lever the company, despite strong cash flows. While everyone waits for SBUX to fix itself up, has anyone considered that SBUX may never restore its operations to its former glory? Finally, not once during the entire conference call were any of the following words mentioned: Asia, Asian, China, Chinese or Pacific. I think that SBUX management is less global and more myopic in a strategic sense than previously thought.
Earnings Release and Conference CallStarbucks reported fourth-quarter 2008 EPS of one penny and full-year 2008 EPS of 43 cents. Revenue of $2.515 billion was generated in the quarter and $10.383 billion was generated for the full year. Included in the results were 9 cents for after-tax restructuring charges in the quarter and 28 cents for the year. Adjusting for restructuring charges brings EPS from continuing operations to 10 cents for the quarter and 71 cents for the year. All metrics missed analysts' consensus estimates.
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At the time of publication, Rothbort was long McDonald's, although positions can change at any time. Scott Rothbort has over 20 years of experience in the financial services industry. In 2002, Rothbort founded LakeView Asset Management, LLC, a registered investment advisor based in Millburn, N.J., which offers customized individually managed separate accounts, including proprietary long/short strategies to its high net worth clientele. He also is the founder and manager of the social networking educational Web site TheFinanceProfessor.com. Immediately prior to that, Rothbort worked at Merrill Lynch for 10 years, where he was instrumental in building the global equity derivative business and managed the global equity swap business from its inception. Rothbort previously held international assignments in Tokyo, Hong Kong and London while working for Morgan Stanley and County NatWest Securities. Rothbort holds an MBA in finance and international business from the Stern School of Business of New York University and a BS in economics and accounting from the Wharton School of Business of the University of Pennsylvania. He is a Term Professor of Finance and the Chief Market Strategist for the Stillman School of Business of Seton Hall University. For more information about Scott Rothbort and LakeView Asset Management, LLC, visit the company's Web site at www.lakeviewasset.com. Scott appreciates your feedback; click here to send him an email. Brokerage Partners
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