Starbucks CEO Situation, and I Bought More Disney and Block

      Starbucks has been struggling for years now. They have faced a caffeine crunch, as cheap, caffeinated beverages have flooded the markets. Their demand in China has fallen off a cliff. And now, their CEO has fallen off the executive cliff, stepping down after 16 months. Starbucks had quite the coup, replacing Laxman with Biran Niccol, the current CEO of Chipotle. This is a super big deal.

      Starbucks stock was up 22% on the news, while Chipotle stock was down 11% on the news. Niccol, the leader of Chipotle, has done an amazing job. Chipotle stock is up over 200% over the past five years (up a lot more before this news), and every metric on the success of the company says that Brian Niccol has done an amazing job leading this company.

      Since Laxman Narasimhan took over in March 2023, the S&P 500 is up 36%, and Starbucks stock is down 22%. The company is being kicked out of China by a vastly cheaper competitor, they are pricing themselves out of lower and middle-class America, which is fine, as Chipotle has shown if middle and upper-class Americans believe you are worth the spend, which Starbucks is not. Their food and coffee are average to below average, and there is still that Israel-related boycott thing, which is dissuading a small minority of their most important and favored consumers, young people. And there is a new caffeinated, trendy drink every five minutes. Starbucks is just such a mess right now.

      This move should dissuade the activist investors, who are rightfully, very upset.

      I will still not buy Starbucks stock because I still do not like the core business. Niccol is a great leader, but I just hate the business. Restaurants in general are not my vibe, but Starbucks is in a tough spot right now, and I couldn’t see myself rotating out of any of the positions I hold just because Niccol is joining.

      On the Chipotle side, this is a disaster. This could be a move that sees the company fall apart over the next five to ten years. Right now, the company is on top, mostly, I would say, because of Niccol. Their revenue and profit are wildly up, their share price is wildly up, and they are massively popular among the general American consumer. They are currently on top of the wave. Staying on top of the wave is a tough thing to do. In industries like fashion, life cycles move very quickly, and restaurant chains are similar, especially when the ascent has been so quick.

       I would sell out if their next CEO is someone I don’t love. Even if they are completely average and fine, I would sell. If their company is a genius who I would trust with the fate of the planet. Martians have the death beam pointed at Earth, and someone has to lead the company to success, sort of situation. Because Chipotle will need a generational CEO to replace the generational CEO they just lost.

       I would be holding my Starbucks, and I would be selling or barely holding my Chipotle.

      I bought more Disney and Block. I sold some of my Ferrari to fund this purchase, which hurt, but Ferrari was weighted too heavily. Both Block and Disney are too low. Disney in the mid-80s and Block in the low-60s is just too low. I had sold out a bit closer to the top of my Disney, but this low of a price is too tantalizing. Same thing with Block.

       Both companies are great stocks, and the underlying numbers are strong. I expect great quarters, and I would be buying.