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🍋 Starbucks Revamp

🍋 Starbucks Revamp

Short Squeez
September 14, 2022

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"Inflation is taxation without representation." — Milton Friedman

Good Morning! I guess the only thing coming out on top these days is inflation, which defied expectations for a drop. Another big Fed hike is about to enter the chat. The Dow tumbled 1,200 points on the news, racking up its worst day since June 2020. If that wasn't enough, a BofA survey shows that investors are getting out of equities fast, with 52% of respondents underweight stocks. Banking deal flow hasn't held up well either, as JPMorgan said advisory revenue will be down 45-50% for Q3 compared to last year. More layoffs?

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1. Story of the Day: Starbucks Revamp

Unlike basically every other company out there, being basic is working for Starbucks, as it raised its long-term financial forecast while breaking down its rejuvenation plan. Over the next three years, the coffee titan is projecting EPS growth of 15-20%. Global and US same-store sales are also projected to rise 7-9% annually.

Who would've thought that a company young people love wanted a facelift? Well the plans for the revamp include expanding the loyalty program and making café operations faster (e.g., creating a Mocha Frappuccino in 35 seconds from 86 seconds). Along with the latter, Starbucks is planning new coffee-making equipment and automation.

The purpose of these changes is to catch up with changes in customer habits. Nowadays 60% of orders on the expanded menu require add-ons, year round. Also, instead of going to a barista, more people are ordering in the drive-thru or off the app.

If there isn't a Starbucks on your block, don't worry, it's coming. Starbucks is planning to build 2,000 new US stores between 2023-25 and by the end of 2025 plans to have 45,000 locations worldwide.

Though habits are changing, and inflation is hitting food hard, one thing remains constant: people need their coffee. Interim CEO Howard Schultz said, "We have been immune from any recognition whatsoever that there is a downturn in customer traffic, a downturn in ticket."

Short Squeez Takeaway: If you're looking for a recession-proof company to invest in, you may have found it. Schultz was critical at investor day and said the company had made "self-induced mistakes" and lost its way. If you ask me though, it seems like they're doing fine, if there was no drop in demand. Inflation headwinds notwithstanding, they still never get my name right! Pls fix!

2. Markets Rundown

A rough inflation report hit equities hard, and also caused investors to exit risky crypto assets, plus the "Merge" nears.

Movers & Shakers

(–) Rent the Runway ($RENT) -39% after second quarter results showed slowed subscriber growth.
(–) SVB Financial ($SIVB) -5% after cutting Q3 guidance during a Barclays conference.
(–) Braze ($BRZE) -19% despite an earnings report that beat expectations, because of worries about future sales.

Private Dealmaking

Google bought cybersecurity firm Mandiant for $5.4 billion
TeraWatt Infrastructure, an EV charging network, raised $1 billion
Avance, a mid-market PE firm, raised $1.1 billion for debut fund
Patra, an insurance processing platform, raised $146 million
Forge, a gene therapy startup, raised $90 million
Bachan’s, a manufacturer of Japanese barbecue sauce, raised $13 million

3. Top Reads

Uber CEO says the company may actually benefit from rising inflation (CNBC)
White collar jobs at risk in next recession (BB)
Apple plans to sell ad spots in app store (CNBC)
The four big factors impacting the market right now (CNBC)
Twitter in the political and business world spotlights (Axios)
Fed to stick with aggressive rate hikes amidst slowing economy (Fox)
Bank of America believes 12-month S&P 500 low is yet to come (CNBC)
Russia’s retreat in Ukraine won’t save Europe from a recession (CNN)
Warning that post-lockdown jobs boom is ending (BBC)

A Message from Sweater

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4. Book of the Day: How to Invest: Masters on the Craft

What do the most successful investors have in common?

David M. Rubenstein, cofounder of one of the world’s largest investment firms, has spent years interviewing the greatest investors in the world to discover the time-tested principles, hard-earned wisdom, and indispensable tools that guide their practice.

Rubenstein, who has spent more than three decades in the hypercompetitive world of private equity, now distills everything he’s learned about the art and craft of investing, from venture capital, real estate, private equity, hedge funds, to crypto, endowments, SPACs, ESG, and more.

With unprecedented access to global leaders in finance, Rubenstein has assembled the most authoritative book of its kind. How to Invest reveals the thinking of the most successful investors in the world, many of whom rarely speak publicly.

Whether you’re brand-new to investing or a seasoned professional, this book will transform the way you approach investing forever.

“Much of life simply revolves around predicting the future and then taking actions that reflect the view of that future.”

5. Short Squeez Picks

The number one reason employees say they will quit
15 life lessons people learn the hard way
7 TED Talks in 7 days that will inspire & motivate you
Why do so many kids need glasses now

What Else To Read

If you love getting Short Squeez (which we'll assume you do), you must value getting crisp insights and actionable intel without all the BS.

The Daily Upside, founded by a team of bankers and journalists, is another great newsletter for big-brained readers. Built with investors in mind, The Daily Upside is packed with heavy-hitting analysis and stories you simply won’t find elsewhere.

It’s the perfect addition to your media diet, striking that elusive balance of gravitas and wit. There’s a reason 700,000+ readers start their days with The Daily Upside.

Sign up for free here.

6. Daily Visual: Most Popular Websites

Monthly visits 1993 - Jan 2022

Source: Eeagli

7. Daily Acumen: Fear

“One of the biggest things holding people back from doing great work is the fear of making something lame.

And this fear is not an irrational one. Many great projects go through a stage early on where they don't seem very impressive, even to their creators.

You have to push through this stage to reach the great work that lies beyond. But many people don't.

Most people don't even reach the stage of making something they're embarrassed by, let alone continue past it. They're too frightened even to start."