Starbucks Flush the Toilet Strategy and McDonalds Entrepreneur Catches a Break - E. coli

Previously sent to CliffCo members on October 23, 2024.

Big lesson for us from Starbucks this morning - when things get bad, like really bad, don't try to spin and win. Instead - ‘flush the toilet’ and get rid of all the bad news at once including any bad news that might be coming down the line and anymore you can think of might be coming.

Late yesterday, a month before earnings reports, the new CEO, Brian Niccol, pre-announced a revenue disaster for the quarter and pulled all revenue forecasts for the year.

We pre-reported this pre-announcement of a Starbucks revenue sinkhole almost a month ago (Oxford Report, Oct. 5th), “Brian’s first staff meeting... Then two hours later the finance guys dropped the bomb...”

Bottom line - he’s buying time to get a grip on what needs to be fixed.

The preliminary numbers were brutal. Store sales are expected to be down 7 percent for the fiscal fourth quarter, the third consecutive quarterly decline. That was driven by a sharp slowdown in North America and China.

Niccol is still figuring out how deep the problems run.

The share price is down in trading this morning, but it’s not a rout and the stock is up almost 30 percent since his appointment, suggesting that investors think he’s the man for the job. Niccol has made some changes. A former Chipotle executive is coming in as the first chief global brand officer and streamlining operations in China by appointing a single boss to run operations in the crucial market.

What’s next: Starbucks is expected to release its full earnings on Oct. 30.

McDonald’s corporate was still roughing up the Entrepreneur for loaning his store to Trump when its share price began to fall after a potential link to an E. coli outbreak.

The Centers for Disease Control and Prevention suggested that onions used in Quarter Pounders were a possible cause of infections that killed one person and made 49 others ill.

Sometimes it’s flushing the toilet and sometimes it's luck.

Buying time.

By the way, people are asking who I know in Seattle. No one comes to mind but we did work on an M&A transaction a long time ago.

American Pie.