Wednesday's Headlines: Starbucks Reveals Its Reinvention Plans

Wednesday's Headlines: Starbucks Reveals Its Reinvention Plans

Here were the biggest movers in the MyWallSt shortlist yesterday:

Moving Up ⬆️

Core & Main (CNM) +2.5%

Twitter (TWTR) +0.8%

Yext (YEXT) 0.0%

Zendesk (ZEN) -0.0%

Avalara (AVLR) -0.2%

Moving Down ⬇️

Stitch Fix (SFIX) -13.3%

Upstart Holdings (UPST) -10.9%

Cloudflare (NET) -10.6%

Lovesac (LOVE) -10.4%

Peloton Interactive (PTON) -10.3%
 

Here are the stories that you need to know ahead of market-open today, Wednesday the 14th of September.
 

Starbucks Reveals Its Reinvention Plans ☕️

Following a tumultuous year that’s seen a huge unionization push, a sudden CEO change, and a resultant six-month search that only yielded a new candidate in recent weeks, Starbucks (SBUX) was probably overdue a bit of a refresh. Enter outgoing CEO Howard Schultz and his slew of plans set to catapult the coffee company forward over the next number of years.

Starbucks announced its intentions to overhaul its store machinery in the U.S., increase automation to speed up its in-store processes, and develop its loyalty program. Most notably, however, was the announcement that it will also invest heavily in its current employees in order to increase both retention and productivity — or to stave off more union pushes.

The global coffee chain also hiked its growth expectations for the next three years, with earnings growth of between 15% and 20% now expected annually for that period — a boost from previous guidance given at the end of 2020.

Yesterday’s announcements mark the latest in a series of sweeping changes at the firm, which is looking to capitalize on what many have considered a relatively successful pivot during COVID-induced lockdowns. Starbucks managed to migrate many of its customers to drive-thru and mobile orders, easing some of the pressure on its in-store operations.

The company is currently down just under 25% year-to-date — lagging just behind the S&P 500 — but it’s up close to 3% pre-market this morning on the back of yesterday’s welcome news. Will this wholesale change yield the results Starbucks shareholders are hoping for? Only time will tell.
 

Twitter Shareholders Approve Musk Deal ✅

Twitter (TWTR) shares are up slightly in pre-market trading this morning after shareholders overwhelmingly approved the proposed $44 billion takeover of the company by Elon Musk.

Despite Musk’s more recent protestations against the deal (more on that in a minute), north of 98.5% of Twitter shareholders who cast a vote by yesterday were in favour of the deal. However, even with the marginal bump that Twitter got from the news, shares in the company are currently sitting more than 25% below the price that the deal initially valued them at.

Even with both management and shareholders on board with the deal, it’s no surprise that there’s some skepticism. Musk has been very vocal in trying to get out of the deal in recent weeks, claiming that the company misled him about the number of spam bots on the platform, as well as security vulnerabilities.

Ironically, the results of this vote came on the same day that Twitter’s former head of security, Peiter Zatko, testified in front of the Senate in relation to his claims that the social media site misled regulators about security failures.

In the hearing, Zatko reiterated some of his more serious claims relating to the company, including that foreign agents working for Chinese and other governments may be employed by Twitter and that the company does not have the tools or incentive to track bot accounts on the platform.

Unsurprisingly, Zatko is a key part of Musk’s plan to get out of the deal.
 

Core & Main Provides a Rare Bright Spot 🚰

Core & Main (CNM) was one of the few bright spots yesterday in a torrid day for the market. While the consumer price index (CPI) report may have rained on most of Wall Street’s parade, Core & Main’s beat and raise allowed it to eke out a small gain on the day.

Blowing past both revenue and earnings estimates, the water infrastructure specialist saw revenue grow 43% year-over-year to $1.9 billion. Net income increased to $182 million, compared to $10 million for the same quarter last year, and adjusted EBITDA increased 79% to $277 million. The company also saw improvements in its margin profile, with gross margin expanding to 26.9% from 25% last year, and adjusted EBITDA margin increasing 300 basis points to 14.9% from 11.9% in the prior year period.

Management raised full-year adjusted EBITDA guidance to the range of $840 - $890 million, which would represent a growth rate of 39% - 47%, reiterating confidence in the company’s business model in spite of the macro backdrop. Much of this confidence is instilled in the nature of Core & Main’s buyers, as evidenced by CEO Steve LeClair’s statements:

“We remain confident in the long-term stability of our business and end markets, as roughly 50% of our net sales is driven by non-discretionary repair & replacement activity. Executing our operating priorities and capitalizing on our industry-leading position will allow us to sustain solid growth for the full-year.”

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