Reading all the coverage of outgoing Starbucks (SBUX - Get Report) Executive Chairman Howard Schultz would leave one thinking two things. First, he has the capability to walk on water while at the same time save the world's drinking crisis (which TheStreet just wrote about here). Second, Schultz already has beaten President Trump by 10 points in 2020 amid promises to put free Starbucks coffee stations in every high school in the United States. The coverage of Schultz' departure, announced on Monday evening but in the works since 2016, has been that fluffy.
It's in no way surprising as Schultz for years has benefited from amazing marketing of his personal brand. Couple that with the fact many people enjoy drinking Starbucks each day and you get endless streams of positive print.
Schultz deserves a ton of credit for creating Starbucks and re-shaping how a commodity is viewed. He also deserves kudos for leading a digital revolution, changing how human beings interact with a provider of goods and services. But how about a little bit of critical analysis here people? For starters, why not look how Schultz is deciding to leave his precious baby Starbucks? The company is battling a public perception issue in the wake of the arrests of two black men at one of the coffee chain's store in Philadelphia. One could make the argument that the unfortunate incident erupted because Starbucks for years has tried to grow too fast without ensuring its foundation -- such as employee training procedures -- is growing accordingly. Some of that has to fall on the shoulders of Schultz since he has signed off on torrid growth for years. Why not stick around for a little longer and ensure problems are fully addressed?
Schultz is leaving just as Starbucks is entering a period of slower growth -- Starbucks revenue growth rate peaked in late 2015 while operating profit margins have been under pressure the past year amid tech and employee investments and rising competition. Moreover, Schultz was supposed to be leading the rollout of Starbucks' coffee cathedrals -- known as roasteries -- around the world. These cathedrals have been pitched to investors as key to ensuring Starbucks coffee leadership well into the future. The point here: Let's applaud Schultz for what he created, but also be mindful that there is another side of the coin ... or in this case the coffee bean.
Its Tesla Time
Tesla's (TSLA - Get Report) annual meeting kicks off at 3:30 p.m. ET and TheStreet will be bringing you live analysis on our site and on Twitter @TheStreet. To be sure, it will be quite the spectacle as Elon Musk's chairmanship as well as three director positions are being challenged. What a mess. I sat down with former hedge fund manager Whitney Tilson on Monday to discuss a range of issues, including Tesla. His thoughts were compelling:
"My gut instinct is that after the last conference call, Musk's increasingly erratic behavior has shaken the confidence of analysts at big firms like Fidelity that sort of make the recommendation to put more capital into Tesla. It's now a career risk for people like that to be recommending Tesla, which means they could have trouble accessing capital. And they are going to need to access a lot of capital at the rate they are burning it."
Tilson added that Tesla may have to do a distressed debt offering. That's brutal, but there is a lot of truth behind the statement. Tilson is still plugged into the world of Wall Street so his comments should have people thinking of possible worst-case scenarios with Tesla.
Around the World of Business:
(1) In a new CNN interview following WWDC, Apple (AAPL - Get Report) CEO Tim Cook said it's "fair" to consider tech regulation. "Generally, for me, I'm not a big fan of regulation. I think self-regulation is the best. He added: "But when it's not working, and in some cases it's not working, you have to ask yourself what form of regulation might be good. And I think it's a fair question many people are asking at this point." TheStreet recently talked with former long-time Cisco (CSCO - Get Report) CEO John Chambers, who also didn't shut the door on the need for tech regulation. Listen to our full podcast interview with Chambers here.
(2) TheStreet's founder Jim Cramer is also responsible for creating the stock acronym "FANG", short for Facebook (FB - Get Report) , Apple (AAPL - Get Report) , Netflix (NFLX - Get Report) and Alphabet (GOOGL - Get Report) . He then coined the term "cloud kings,"designed to capture the strength of cloud giants Adobe (ADBE - Get Report) and Salesforce (CRM - Get Report) . Now Cramer has developed his latest investing term that will no doubt be used on Wall Street trading floors. Enter "INJFANG." More on what that is here.