I’ve been a big fan of Starbucks (SBUX) stock, saying to anybody who will listen that if I were allowed to buy a stock and put it on the shelf for a few years — buying more as it falls — Starbucks would certainly be one that I would consider.
Among the reasons: It’s a strong brand (and I like brands), Howard Schultz has his reputation at stake, coffee ain’t going out of style, McDonald’s (MCD) is limited as a competitor in terms of its coffee offerings and if ever there were a time to do a turnaround, it’s now — during a horrible economy — when the business would have done poorly, regardless. (And I didn’t even mention China.)
In the wake of yesterday's warning from the coffee company, one private retail analyst, who has disagreed with my premise from day one, wrote to say:
This was/is an easy short. There's no opportunity to drive incremental traffic, only an opportunity to keep the customers they have. Howard Schultz is going to become known as the next Michael Dell. Visionary comes back and finds the company's current challenges much different than building a nascent growing brand in a relatively new industry.
He’s not the only one to say I’m too much a Pollyanna (who, me?) on this, even if it’s long-term positive. (My problem is that I can’t get McDonald’s out of my head; remember, years ago, when everybody said it was destined for demise?)
So, tell me, who will ultimately be proven to be right? Me, or my retail analyst pal? And why? If you side with him, comments like “Starbucks sucks” won’t cut it.
Disclosure: No positions