This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

One CEO Belongs in the Outhouse, Another in the Penthouse

Somebody who doesn't delusionally throw words such as "transformation," "innovation" and "revolutionary" around until they're doing something like waiting to officially count as revenue $1.4 billion loaded worldwide on Starbucks cards. Not trying to sugarcoat tens of millions of dollars' worth of losses. Not trying to pass off long-standing failure as don't hold your breath forthcoming success.

They got an apartment with deep pile carpet/And a couple of paintings from Sears/A big waterbed that they bought with the bread/They had saved for a couple of years/They started to fight when the money got tight/And they just didn't count on the tears.
--Billy Joel, "Scenes From an Italian Restaurant"

But, back to Sozzi ... here's how he characterized Shop Your Way over the weekend via text:

You are giving discounts to your lowest income consumers to purchase the lowest of margin items. They aren't shopping the entire store. If you want to be a club, charge a membership fee like Costco so at least u have a recurring revenue base that pads the discounts on the merchandise. Rewards cards work at CVS (CVS), Walgreens (WAG), GNC (GNC), Vitamin Shoppe (VSI) because of repeat, loyal business to clean and safe stores.

And his take, via email, on Starbucks, which, IMNSHO, is a bit too cautious and skeptical of Schultz's greatness, but prudent nevertheless:

Although a high class problem to have, I think long lines amid an expanding menu are creating rapid out of stocks of food and less of a hot food attachment rate at Starbucks.
How do I know?  I have studied it playing out in Starbucks increasingly since mid-2013 and hear it from random people sampled. All of this is happening as Wall Streets full year earnings estimates are handily above the companys guidance. Now, Starbucks downplayed that throughput issues are impacting sales, but I need to ask further questions during an upcoming chat. If I hear processes are being tweaked to service lines quicker and ensure items are in stock, it will alleviate a key element in the downgrade.

A downgrade, which Sozzi stresses is to "hold from buy" and, in practical terms, means ...

sell some shares in our -- 2013 Top Pick -- Starbucks, freeing up capital for a possible re-entry or to use elsewhere, but stay exposed as the long-term outlook remains bright.

I can get with that. There's never anything wrong with taking profits, namely in high flyers. 

And I can also get with what TheStreet's Jim Cramer said about Schultz and Starbucks last week, also on Real Money:

... because the headline writers and the Quick Draw McGraws didn't wait to hear the guidance for the future they didn't know that Starbucks had sold a huge number of gift cards, far more than anticipated and that will produce a huge shift of revenues into the first quarter, far more than what might have been missed in the quarter just reported.
Remember, we care more about a company's future, not its past and this gift card news was nothing short of fantastic for the earnings projections. You could not have learned about it from the headlines though, you needed to hear it on the call.

And what a call it was. Among the best in the business. Like Cramer says, listen to the conference calls. In fact, here's a link to the Webcast of the SBUX one currently under inspection. If you don't walk away with the same feeling of confidence in Schultz that investors have in Bezos at Amazon, I reckon you can see the turnip truck's brake lights a wee bit better than I can.  

--Written by Rocco Pendola in Santa Monica, Calif.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks. Rocco Pendola is a columnist for TheStreet. Whenever possible, Pendola uses hockey, Springsteen or Southern California references in his work. He lives in Santa Monica.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,098.45 +18.88 0.11%
S&P 500 2,003.37 +6.63 0.33%
NASDAQ 4,580.2710 +22.5760 0.50%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs