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.