Why Starbucks Stock Is A Garbage Stock
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Today we discuss Starbucks stocks which have been a horrible stock for the past 3 years. The new Starbucks CEO Kevin Johnson is having a lot of trouble with the business. Howard Shultz uses to have the business running pretty well until the end. Starbucks also announced it will be closing 150 stores in the US.
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Bowman it’s time to piss some people off. Today we’re going to talk about why Starbucks stock has become an absolute dumpster fire of a stock guys, this stock has been a horrible performer over the past few years. Okay, Starbucks.
if you invest in Starbucks in the 90s, you made a lot of money, okay? You made a lot of money up until basically in the past few years when things have changed for the worse at Starbucks, okay, Starbucks, in the past three years.
Starbucks in the past three years is down 7%. In the past one year, Starbucks stock is down over 15 and a half percent, while the s&p 500 over the past three years is up around 31%. In over the past year, the s&p 500 is up around 13%. Okay.
And so I’m going to take you through everything, everything on why Starbucks stock has just turned into an absolute garbage stock after it was one of the darlings, you know, like in like the 90s all the way through most of the 2000s.
Like this was a great performing stock, like you stick money in Starbucks stock, you’re gonna make a lot of money each year, or you know, every other year or something like that, like you’re gonna make a lot of money and, but lately.
This stock has just become a disaster. Okay, we’re gonna we’ve got so much to get into that with this one. It’s unbelievable guys. And well, I touched Starbucks stock, I have absolutely no interest in touching Starbucks stock. And I’m going to take you through all the different reasons. So I hope you guys really enjoy this today. Let’s get into that. So first off, we’ll start off with the most controversial one first, okay, well enough.
These are not in order. You know, I’m just gonna go through all the things that just come from the top of my mind I’m have they screwed up this business. But these are not an order.
This isn’t like this is the most important thing. But this first one I’m talking about, this is the most controversial, and it’s what we call forced hiring, okay, forced hiring practices, what is forced hiring practices mean.
Force hiring practices has to do when you set goals for your company to hire a certain amount of people have, you know, from a certain type of background, a lot of refugees, or a certain amount of people from military bracket background.
Or a certain amount of people that have a certain skin color, or certain gender and all those type of things. And Starbucks has decided to take their company down that route. Okay, so most controversial one, because, you know.
We all like to feel good about ourselves in and say, you know, everything should be equal, but in the end, we wouldn’t when we talk about capitalism, it’s the best person for the job should get the damn job, okay.
If you’re going to go into an interview, and you’re pretty much forced to hire a certain person, you know, you’re like, dang, well, we need to hit this number for refugees. And you got to send the person who might be way more qualified.
But you’re like, dang, we need to hit this number for refugees. Well, let’s hire this person, because they come from a refugee background. That’s an issue, okay. When you say, Oh, you know, and I can guarantee you if they have.
They have quotas in their company that they’re willing to publicly, you know, put out there to the public, right? Around refugees and military members and things like that, I can almost guarantee you.
They probably have internal numbers that they want to hit for a certain amount of females in the company, a certain amount of people have each skin color, all those type of things, okay, and why it sounds beautiful.
It’s not taking the best person for the job. Imagine if we did this with sports, okay. Imagine, you know, someone that watches sports myself, like, like, it’s pretty obvious. You noticed, like, there’s certain things right.
The NBA last time I checked, like, they’re all they’re all males. Okay, there’s no females in the NBA, right? So So, you know, 50% of population is not in that Imagine if Olson we said, well, now we got to have you know, 50% of the NBA players, they have to be females. Okay.
Imagine how that would change the NBA. Every time I turn the NBA game. You know, despite there being a heck of a lot more white people in the United States of America than black people.
Guess what? The games are filled with massive amounts of black people. Imagine if we said, You know what, Kevin Durant. Sorry, dude, but we got to hire more white people. Because guess what, man like, like, we have way too many black people in NBA.
We don’t have enough white people. Like, that’s a stupidest thing I’ve ever heard in my life. But some of these companies Starbucks, they treat it like that. They’re like, dude, we got to hit this number.
We got to hit this number, then we got to make all this stuff. And that’s not capital. That’s not how things work. If you got to hire the best person for the job, not the one that comes from a certain kind of background.
Okay, that’s when your company starts to go down and down when you’re just trying to hit quota numbers because Damn, we need some more females here. Then we need some more people in this background.
We need some more refugees or whatnot. And by the way, you want to really piss off a lot of people you did tell the American people that built this American company that on their backs, okay.
Americans built Starbucks and American money built Starbucks and right and you’re going to tell them American we’re gonna hire a refugee over you because we’re gonna we need a certain amount of refugees.
Dang, man. That’s tough, man. That’s tough. Try winning that over the with the people. Okay. Forced hiring practices. Just one of a million things where I Starbucks has been hurt. Okay, next one.
I want to take it to let’s take it to something you know, more stock market related and then we’ll we’ll go We’ll go back. There. Just got a high p E. Oh, Hey, this company just got to be at a place where they were trading.
Like this was a growth stock, when really the growth has been slowing for a while, it’s pretty been pretty obvious. But if the stock would be trading at a 2628 30 pe on this company, and it’s like, Dude, this is not a growth company.
This is trading like it’s a growth curve. like Starbucks recently, as much as like about a month or two ago, when I was looking into it, Starbucks had a higher p e ratio than Facebook.
I can, I wouldn’t bet any dollar I could out there that Facebook is going to grow a lot more revenues, profits, whatever metric you want to look at than Starbucks will in the future. Okay.
But Starbucks was trading at a higher p than Facebook, I looked at Facebook, this was like a month or two ago, Facebook had like a 23 on it. And there was Starbucks at like a 2728.
I’m like this, these these companies aren’t even comparable, Facebook is going to grow massively more than Starbucks will grow. I can almost guarantee you that. Again, it was trading like it’s such a high p e stock and it’s like.
There’s something wrong with that. Okay. Next thing we’ll go over to is what I would call just poor customer service. Okay, poor customer service. And that’s just across the board.
You know, from the customer experience standpoint, it just from my standpoint, like like we stopped at a Starbucks a few weeks ago, when we were going on vacation to San Diego away.
We stopped at this Starbucks. I ordered specifically a decaf, you know, whatever it was I ordered decaf latte or whatever. They make it a caffeine. Okay, okay, I can get over that. Right. My wife orders and ice to drink. Okay, and ice drink.
Also decaf. They make it caffeinated. And they make it hot. And it was the worst tasting thing. I cannot I can live it. Like if you grab a bottle of freakin water right? And you poured some Lysol and some other chemicals in that and drank them.
That was what this drink tastes like. It was the most disgusting thing. I my wife was like, Oh, this is so gross. I thought she was exaggerating. And I tried to literally taste it. Like if you’re drinking a bottle of chemicals.
I’m like, this is time to stuff you cannot do okay, I have another Starbucks I went to a few months ago, I go to their bathroom, it was like a disaster zone. I’m like what is going on with this place, customer service levels poor.
You try to get a table and they’re all dirty, and there’s no one around cleaning, I’m like, like, like, it’s a poor customer experience, you’re gonna you’re gonna charge people $6 for this drink that cost you maybe $1 to make at the most.
You’re in charge six people, you know, six bucks, five, six bucks for that drink. And it costs you maybe $1 and costs probably less than that. And you expect people to pay those type of prices.
And this is the type of customer service you give to the people like like, that’s just bad, man. That’s bad, bad, bad. Okay. Now part of the reason is just because of lack of focus, okay, lack of focus is not there from the executive team.
Their focus on too many things and not enough on the stores. Okay? So they’re so focused on, you know, building China now. And then they got to have the result or reserve roastery business that they’re trying to get up and running and things like that.
And so they got all these focuses all over the place. But really, the focus should be on customer experience, okay, then it should be on customer experience. And that person being deleted each and every time they come into a Starbucks, right.
And the focus has just not been there from the management team at all right? Next up, I mean, it’s just thing after thing you go with this, this company, Okay, next thing is competition.
Competition has heated up in this space, in a massive way used to be like, you know, Starbucks was one of the only places you really realistically go if you want, you know, a frappuccino or something like that, dude.
Now you can get a frappuccino from you know, high end, like a quick trip. I used to work at Kwik Trip, right? It’s a gas station. Dude, we can make you a frappuccino. They’re like fresh up and it was just as good or, you know, pretty close to as good as one you’d get from Starbucks. Okay.
And it was half the price. And it was at a gas station. All right. So So this whole thing about them having like a monopoly over like the frappuccino and like the ice side of their business, you know, regular coffee has been competitive for a long time.
But now we get into a place where even you know, the specialty drinks. McDonald’s has a huge cafe business now. Right? And I’ve tried, you know, a lot of the McDonald’s products and they’re pretty much right there with Starbucks. Okay.
So you’ve had massive amounts of competition, then we can get into all the smaller players that have come into the space, we can just talk about the big ones, but then the small ones, you know, like out here in Vegas.
We have one that’s expanding called Dutch Bros, Dutch Bros, I would go to over them over Starbucks, like any day of the week, it’s not even on a comparable scale. And Dutch Bros has such phenomenal customer service and they greet you in they’re happier.
What nonsense Starbucks is like, What can I get for your type thing and the lady’s half asleep? I remember we went to that Starbucks going on San Diego. The chicks like literally half asleep like taking the order.
Like dude, or what kind of drugs are you on behind this counter like Lego? Like wake up, man? It’s time to go it’s like work like it pisses me off when people are behind the counter. And like they’re not ready to go.
It’s like Dude, snap out of it. Like unbelievable, man. Unbelievable. Now I’m just rambling at this point. Next up Okay, next of us if this wasn’t enough, okay? wages are going up, okay. Wages are going up.
Whether we’re whether we’re talking about, you know, wages from a perspective of minimum wage. It’s going up all across the country, okay. Now Starbucks, you know, they don’t really pay around minimum wage.
They pay a little above minimum wage, usually for some of their entry level workers. But the issue is when when minimum wage goes up, let’s say, you know, minimum wage was $8 an hour. All right.
That means Starbucks could probably start hiring some of their entry level workers around 959 75. And oh, we’re quite a bit above minimum wage, but then when the state or federal, you know, whatever decides we’re going to go to $10 an hour.
Now Starbucks has to pay 1175. And that worker just got $2 an hour more expensive. Now, you times that out by the whole company, we’re talking about massive increases in wages, okay.
So wages going up and up and up, just hurt your profitability. Okay. Then we have more if that was not already enough, okay. Then we have an economy that is getting stronger. Okay.
We have an economy that’s been getting stronger for the past few years. Okay. So we see over the past three years, Starbucks has been a poor performing stock. Well, over this past three years, this economy has continued to strengthen.
So while Starbucks could get really high, you know, really good worker, there’s put that way really good high end workers for really cheap prices. during the recession in the coming years coming out of the recession.
They can get a lot of great workers, no sudden when the economy starts to strengthen people are like $12 an hour to make coffees now think I want to go work this construction job, or this new place that opened on the street that’s paying $15 an hour or $18 an hour.
There’s $12 an hour at Starbucks incontinent so you start to lose more and more of your workforce, okay? Because the economy strengthens and when you have you know, low paying jobs what Starbucks does.
Like Starbucks has low paying job whether you’re looking at it from you know, an assistant manager at Starbucks or whether you’re looking at from a line worker they’re low paying jobs, okay, they’re low paying jobs, those low paying jobs.
Those get hurt the most as the economy strengthens okay? So all sudden you you start losing some of your better workers and your wages are going up. Dude, that’s like a double edged sword man, you’re getting cut from both sides.
You’re having to pay more to workers that probably weren’t as good as used to have a few years ago right? That’s a bad that’s tough, man. That is freaking tough. Okay, that’s really tough. All right.
Next thing China growth has slowed in a major way okay. China growth has slowed in a major way us growth has been slow for a while now. But people have been you know, investors I should say have been kind of looking past that because they’re like, oh.
China China’s growing strong look at China comm store sales. We’ll look at the China comm store sales they went from growing massively to now they’re flatline and man and you know what happens when you’re flatline and pretty soon you might be on death Okay, that is not a good situation All right.
Well, you know, comes to our sales for China were like eight plus percent, pretty consistently, you know, 678 plus percent Nelson, they’re flatline and it’s like what happened to Starbucks business in China that also almost overnight this business went from growing comp store sales, very strong.
Tulsa now they’re flatline and when you go like that next thing you know you’re going down Okay, next thing you know, comm store sales got to start going down in your store that you had there is making less money.
They blame part of this on cannibalization. They blame it on another company that has a delivery service or something like that. I’m saying that there’s some type of major issue there for you to go from consistently grown comm store sales at a high single digit rate.
Tolson, now you’re not growing at all. That’s a big, big change there, guys, that’s a big, big change. All right, you’ve got all this going. And it’s so much guys, it’s so much and we don’t even have to get into the dividend.
And you know, the fact that they pay out, you know, the dividend and the fact that they bought a lot of shares back at probably bad prices, we go into so many different things. But you can see why Starbucks has had a huge issue on its hands why this company has become a garbage stock Okay.
Why this stock has become a garbage stock when you’re down 7% when your stocks down over 7% in the past three years, you have 36 months three years for your stock to at least go up a little bit you’re down that much and a time the market was up 31% that’s not good.
Especially when you are historically a great company and now they just you know Howard Schultz has left the company when not who knows he might try to run for president we don’t know that would probably just bring more negative publicity to Starbucks.
If he even tried so you got so much going on you know it forced hiring practices is never good. Okay. Forced hiring practices when you’re forcing, you know, your company to essentially you know.
Give somebody preference because they come from a certain type of background, you’re not hiring the best work you’re hiring do what to meet your agenda. So your numbers on a paper, say Oh.
We got this many people working for us that are like this and whatnot. That’s not an asset. That’s bad. Okay, high p e ratio has heard this company because they’ve been overvalued.
They’ve been valued like a growth stock. They’re really not a growth stock. All right, customer service levels have been going down and down and down. Focus has not been on where the business should be.
Which is on the store experience and making sure every single customer has an amazing experience when you’re charging six bucks for coffee. That’s what should happen. competition from the highest end from the big dogs.
The McDonald’s of the world, you know, the big players, to the smaller players, a Dutch in the ton of new coffee shops coming up, competition is getting even more increasing wages, boom, they’re going up.
They’re going up minimum wage. You know, Starbucks is having to pay a lot more to their their entry level workers, we got an economy strengthening, that means you’re going to lose some of your best workers because they’re going to go find better jobs because the jobs are actually available out there.
And then you have China which has just become you know, a disaster almost overnight and a real issue. And that’s going to take management’s focus even more away because now they got to worry about how the hell do we get China to grow like China was growing phenomenal Nelson.
Now,it’s flatline when it comes to our sales, a flatline so now management’s focus is coming over here. And management’s focus really needs to be on the US stores in their their home market and getting those customer service levels to be creme de la creme.
It’s not creme de la creme, it’s garbage right now, the stocks at a hot garbage fire, I wouldn’t buy it. If it was $40. I won’t buy it. If it’s $30. Literally I would not buy if this stock went to $30.
Tomorrow, I would not buy the stock, I would not buy it. It has too many issues right now. We’ll see if the CEO can fix them. You know, he did an interview the other day on CNBC was like 15 minute long interview.
I watched the whole thing. He tried to portray that he’s very confident. I think he’s got a lot of issues that he’s going to try to need to fix a lot, a lot, a lot of stuff going on there. So it was I would love to hear your guy’s opinion on Starbucks in that comment section what your opinion is, from a stock perspective, a customer’s perspective.
I would just love to hear from you guys down there. As always, make sure you follow me on Instagram if you have not already linked down there in the description. Thank you for watching. Have a great day.