so famed investor Nelson Peltx has taken a just over 1% stake in Starbucks (SBUX). At least there is finally someone there who makes the stock (and company) interesting..
Recently, the billionaire has bought large stakes in Wendy’s (WEN), Kraft (KFT) and H.J. Heinz (HNZ) through his hedge fund. Peltz then pressured management to make changes aimed at improving profit margins and lifting stock prices. Typically Peltz pressures the companies to focus on the core of their businesses and divest sell off less-profitable endeavors.
Based on that alone one can expect the “Entertainment” division of Starbucks to be first on the chopping block. Rather than producing albums and books, let just get the coffee thing going in the right direction.
Starbucks is coming off a Q2 that saw net income fall 28% and its same store sales at U.S. locations fall by their widest margin ever. Management is going to have a real hard time dismissing any ideas Peltz puts forward based on both their current track records lately.
This is really good for shareholders. If nothing else, Peltz will remind them of what the chain really is supposed to be, a coffee house. Not a book and record producer. Not a coffee machine retailer. Not a baker and so forth. Just do coffee and do it very well and people will return.
Here is another idea. Why not franchise? Really, why? It may be a bizarre control things in Seattle but it works just fantastically for every other multi-location food retailer (yes, that is what you are). Franchise fees alone would add to the bottom line while reducing costs, freeing up money (not for expansion) but for buying back shares or actually giving shareholders a dividend. They deserve something after the last 18 months. Hell, put 10% to 20% of the US stores up for sale to “master franchisees” and watch the offers come pouring in.
It would work…..if they will just listen out there which, unfortunately, is not a given..
Disclosure (“none” means no position):None
One reply on “Peltz and Starbucks: Bad for Schultz, Good for Shareholders”
Good article however, I think it is 1/10th of 1%. I also think there will be many more buys. With Schultz holding 4%, Peltz will need a bigger chunk to make waves.