By Mark Kalinowski
Published on December 13, 2018 at 12:00 AM
Earlier today, Starbucks (SBUX; Neutral) hosted its every-two-years Analyst Meeting, this time around in New York City. In our view, the strategic path that Starbucks laid out — under the “Growth at Scale” theme — looks reasonable to us. Also, on the positive side, the transition from Starbucks being “founder-led” to “founder-inspired” — always a tricky thing to navigate for pretty much any company of size — seems to have gone relatively well, all things considered (meaning, look at examples of companies that didn’t get that transition right). On the risk side of the equation, some of the most challenging risks are to a meaningful degree outside of Starbucks’ control, with Dunkin’ (owned by Dunkin’ Brands Group [DNKN; Neutral] recently launching its revamped espresso platform nationwide in the U.S.), and privately-held Luckin Coffee — which ended 2017 with zero stores in China — now at 1,700+ units in that key market (and growing rapidly). That said, Starbucks understands that its brand is different from others in the coffee marketplace, including (but not limited to) Dunkin’ and Luckin Coffee, and will seek to further differentiate the Starbucks brand going forward. We tweak our fiscal 2019E and fiscal 2020E EPS estimates downward by $0.01 each, to $2.65 and $3.00, respectively. We reiterate our Neutral rating on SBUX, and note the following:
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By Mark Kalinowski
Published on December 5, 2018 at 12:00 AM
Earlier today, Yum Brands (YUM; Buy) hosted an Analyst Meeting in New York City. The theme was “A World of Opportunities,” which highlights the global opportunities for the company’s KFC, Pizza Hut, and Taco Bell brands. Management says it wants all three brands to be distinctive, relevant, and easy brands. Going forward, management also indicates that collaboration amongst the brands will increase in importance, with management saying “our ability to collaborate will set us apart from our competitors.” This will be a positive if it can come to fruition, but for those on the Street — and we have been amongst them — who believe value can be unlocked by separating out one or more of Yum’s brands, management seems more dead set against that path than ever. Management states that there’s “simply no other restaurant company or retailer in the world like us,” and that “we’ve done from a mindset of being equity operators to being brand builders.” Management adds that “the four growth drivers drive same-store sales, they drive new unit growth, they drive system sales.” Those four growth drivers are: (1) distinctive, relevant, and easy brands, (2) unrivaled culture and talent, (3) bold restaurant development, and (4) unmatched franchise operating capability. We reiterate our Buy rating on YUM and note the following:
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