[DD] I did a “The Big Short”-style research on $SBUX

by nckw90

TL;DR: $SBUX 4/17 $50p, $SBUX 5/15 $40p

Last post: [DD] $SBUX is gonna sink!

Hello autists, on Saturday 3/21 I went out with my fellow retard and did some investigation on Starbucks in Toronto, Ontario, Canada. We pretended to be the retards in the movie The Big Short who were investigating mortgage-unpaid houses.

1. We checked 22 Starbucks, 16 of which are located along Yonge Street, basically the street with the most hobos in Toronto, i.e. the busiest street; the other 6 are just random picks in the areas that I am familiar. So this is not an accurate investigation. It is just two fellow retards pretending to be movie characters.

For locations’ details please click here.

In summary, out of these 22 stores:

  • 11 out of 22 are Closed. The 11 closed ones are all in downtown area, near street and without drive-thru option. For the same reason, many stores in the US major cities like Seattle would be closed.
  • Only 1 store has drive-through and it is in suburban town. Drive-through staff said: “busy. Same amount of drive-thru people.”
  • 10 open maybe because they are essential to public service officers (police, fire department, hospital, etc.); still too many open but I do not know why. 1 claimed “1/8 of normal volume”, 1 claimed “only 10 customers per hour compared to 800 when busiest”

2. So let’s do a very dumb calculation:

70% of sales come from the drive-thru

60% of Starbucks locations have drive-thru capabilities

If Starbucks keeps only drive-thru and some “essential” stores open,

the drive-thru stores will generate 70%*60% = 42% of regular volume,

plus those “essential” stores, say 1/4 of the 40% non-drive-thru stores are open, which is 10% stores are open with only 1/8 of regular volume, equal to 1.25% of regular sales.

READ  Dollar short is the most crowded trade. All are sitting at the same side of the boat.

Then the current sales would be 42% + 1.25 % = 43.25% of regular ones.

But due to the new “30 days salary for baristas even not showing up” policy, a drive-thru store would be closed if most workers don’t want to come. The drive-thru stores will generate less than 42%.

The calculation above is dumb as fuck, with small sample size, stupid simple adds and multiplies, ignoring the difference between Canada and other markets, excluding many factors like delivery orders, other product sales, bluh bluh bluh. It is just to show an idea that how big the difference is. The sales volume could drop lower than 40% of regulars. Yes just put it as I just made the number up.

With such a big drop in the revenue, while still having to pay salaries, you can see how big the drop would be in their earnings. Probably it will end up losing money in fiscal year 2020.

And yet, they would like to keep their promise of 40m shares buyback.

The calculation didn’t consider the drop that caused by people not buying coffee because staying at home or working from home.

3. Some of you might want to talk about Chinese market, saying they will reopen 95% of stores by end of March.

But,

According to Statista, Starbucks has 31,256 stores worldwide (in 2019).

USA:13,189

International: 15,041

Out of the internation 15,041 stores, Starbucks has 4,200 stores in China, according to Starbucks in China.

China’s coffee market is growing rapidly but it is not a coffee-country. Drinking coffee is more of a show-off habbit among the white-collars in major cities. Most people don’t drink coffee.

READ  It's time to short $Facebook?

News said Starbucks is going to reopen 95% of their stores in China. 95%, sounds good, but will people keep buying Starbucks after this pandemic disaster? Considering both fear of next virus wave and the desire for them to save money for other essential needs, or simply they buy cheaper coffee or other beverages. Starbucks is not the only company selling coffee in China.

Starbucks coffee is expensive af to us already. They are more expensive in China and their people’s incomes are much lower than the US people. This pandemic is going to hurt Starbucks in China badly.

4. Ok retards, I am too sleepy to throw in numbers and sources like the big hit in Chinese market and how their business gets hurt in Europe (I don’t even want to look it up and paste sources). After all, it’s all priced in.

And I know no shit about technical analysis and stock price analysis. I can’t point out how much lower will $SBUX go, I simply expect it to be lower and lower. Just buy puts and make tendies, or lose your life savings on this and then blame me like blaming those quadruple witches. This is just a sloppy DD, don’t expect me to write a scientific essay.

Final words: the biggest challenge in the investigation was that many Starbucks stores don’t allow customers to use washroom anymore, so at one point I considered to use a coffee cup to do it. Please include this scene in the movie for me.

 

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.

21 views