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Miami Herald
2 hours ago
- Miami Herald
Starbucks' problems may be too big to fix
In its early days, Starbucks' approach was unique. Unlike rivals like Dunkin', Tim Hortons, and breakfast diners, its mission wasn't to provide one coffee for everyone as fast as possible. Instead, it treated making coffee like a craftsman makes fine furniture, focusing on the highest quality product regardless of how long it takes. That approach helped Starbucks grow from a single store in Seattle, Washington, to a coffee powerhouse with 32,000 stores located in just about every nook and cranny of the globe, including: Over 18,000 stores in North 2,800 stores in than 6,500 stores in 1,300 stores in the Middle East and North Africa. 1,800 locations in Latin America, including more than 70 in Colombia, putting Starbucks about as close to the coffee's origins as possible. With that kind of growth, and plenty of shareholders eager for ever-increasing profits, it's pretty unsurprising that Starbucks has dealt with growing pains. The company has faced controversies over worker pay (and what they wear), and customer complaints over inconsistent drink tastes, food freshness, and, more generally, the rise of a less-relaxed cafe vibe, too focused on boosting transactions and profit margin. The situation has left many scratching their heads, wondering if Starbucks' new CEO, Brian Niccol, can get things back on track. Long-time hedge fund manager Doug Kass is among the doubters. He recently sent a particularly harsh message about Starbucks, suggesting Niccol's strategy to get Starbucks back to its roots is unlikely to pan out. Image source: Goodney/Bloomberg via Getty Images Starbucks' (SBUX) stock price financed a good chunk of the company's global expansion. Investors eagerly bought shares early in the company's growth phase to profit from the opportunity for its customer-first approach to dislodge market share from rivals like Tim Hortons and Dunkin'. Long-time shareholders have been handsomely rewarded, given that Starbucks shares have surged since its IPO in 1992. A $10,000 investment then would be worth over $3 million today. Related: Starbucks abandons key strategy to embrace its past However, many investors' love affair with Starbucks has faded since the company has mostly saturated major US markets like New York and California, reducing chances for sales growth. Its share price is up just 15% over the past five years, while the S&P 500 has climbed 89%. In 2025, Starbucks' stock price has fallen nearly 5%. With Starbucks stores seemingly everywhere, long-time hedge fund manager Doug Kass suggests the company's strategy nowadays is less about reimaging coffee houses and more about milking as much money out of existing locations as possible. Such an approach can boost earnings in the short term, but it poses a significant long-term risk to Starbucks' brand. "[Starbucks] morphed into overpriced purveyors of food/coffee - while the quality of their product offering has deteriorated and the selling cost of the product has risen," wrote Doug Kass in a post to investors on TheStreet Pro. It's not just the coffee, either. While many may think Starbucks bakes its treats on site, many are previously frozen. "I couldn't create a danish as unappealing," said Kass, who has managed money professionally for about 50 years. Some Starbucks employees agree that the company's mission has lost its way. It was once highly recognized as a pioneer in employee pay, offering solid wages and a "partner" approach to its workers. Employees, however, have increasingly explored unionization in recent years, saying the faster-paced environment is taking a heavy toll on its once-lauded baristas, and pay hasn't kept pace. Starbucks' response to unionization has drawn fire from worker advocates who suggest management has engaged in union-busting decisions. For example, the National Labor Relations Board (NLRB) has accused the company of firing or disciplining workers, including the high-profile case involving the "Memphis 7," seven workers terminated after advocating unionization. That case went to the Supreme Court, where an earlier court decision to grant an injunction supporting the workers was reversed in Starbucks' favor, and the case was sent back to the lower courts. The first corporate Starbucks location to unionize was in Buffalo in 2021, led by Starbucks Workers United. As of August 2025, workers at over 600 Starbucks stores across the US have voted to unionize, according to Workers United. The company's frayed relationship with some employees isn't the only problem CEO Brian Niccol is trying to fix. Niccol joined Starbucks as CEO in 2024 after over six years at the helm of Chipotle. Shortly after Niccol took over as Starbucks' CEO, he acknowledged, "a shared sense that we have drifted from our core" and announced his "Back To Starbucks' plan to get the company back on track, focusing on a "welcoming coffeehouse where people gather and where we serve the finest coffee, handcrafted by our skilled baristas." However, those comments and Niccol's plans sound hollow to Kass. "When he got to Starbucks, Niccol started off by using fancy jargon to distract from the fact that Starbucks is losing to both value and premium brands/operators," wrote Kass. "Starbucks now faces a very expensive overhaul in its physical locations and product offerings." Starbucks' competitive advantage hasn't been lost on rivals. Big rivals like Dunkin' and McDonald's have expanded menus, including popular refreshers, while local mom-and-pop cafes have leaned hard into the artisanal coffee house vibe. Related: McDonald's to test five crazy new drinks Winning back market share from those players won't be easy. As a result, Niccol's overhaul could pressure Starbucks' profits while ultimately doing little to restore Starbucks's culture, disappointing investors. "The brand is now very weak competitively - they aren't premium (artisans, local brands, etc.) and the previous also-rans are coming in hot with smaller footprints," said Kass. "From a product standpoint, they sell more chemicals, sugar and ice - it's not coffee." Undeniably, many remain loyal Starbucks fans, but there are more choices, and with less connection to the employees, the moat of loyalty isn't nearly as strong as it was in the past. "It is the Regal Cinemas concession stand without the movies. The notion that the baristas want to hang with the customers has been lost," said Kass. "I suspect the turnaround in both companies will take a lot longer than the consensus expects." To be sure, Starbucks' challenges aren't unique. Indeed, most companies experiencing the kind of success it has experienced deal with similar issues. Still, the hyper-competitive coffee market and the challenges facing Niccol leave Kass thinking that there are better alternatives for investors. "I would not bottom fish despite the material share-price weakness," concluded Kass. Related: Why did stocks tumble this week? The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.
Yahoo
4 hours ago
- Yahoo
The S&P 500 Has Reached an All-Time High: Should You Invest Now or Wait for a Correction?
Key Points Market indexes have been reaching new heights, and right now is an incredibly expensive time to buy. Some investors are worried a correction or recession may be looming, making it smarter to wait. However, history suggests that there's never necessarily a bad time to invest. 10 stocks we like better than S&P 500 Index › The S&P 500 (SNPINDEX: ^GSPC) has been breaking records over the last few weeks, officially reaching a new all-time high in July. As of this writing on Aug. 1, it's up by about 25% from its low point in April. However, not everyone is optimistic about the market right now. In fact, one-third of U.S. investors say they are feeling "bearish" about where stocks will be in the next six months, according to the most recent weekly survey from the American Association of Individual Investors. With stock prices near record-breaking highs, some investors may be tempted to wait until the next downturn to buy at a discount. Here's what history says about whether you should buy now or hold off. Is it safe to invest now? Nobody can predict where stocks will be a few months or a year from now, and new policies out of Washington could change things on a dime. However, several scenarios are possible. For one, stock prices could continue soaring like they have over the past few months. If that happens, right now would be a fantastic time to buy to see immediate gains. Scenario two is that the market takes a sharp turn for the worse, like it did earlier this year amid tariff uncertainty. Between February and April, the S&P 500 fell by close to 20%, leaving many investors panicked and eager to sell. But those who stayed the course and held their investments reaped the rewards when the market quickly rebounded. A similar situation played out in March 2020, when the S&P 500 experienced one of the fastest crashes in history at the start of the pandemic. The short term was rough, but the S&P 500 has since earned total returns of nearly 112%. The third scenario may be the one that concerns investors the most: a prolonged recession. But even if that is on the horizon, investing at record-high prices doesn't necessarily mean you'll lose money. A market downturn may result in your portfolio losing value. But if you hold your investments until the rebound without selling, you likely won't experience any actual losses. Say, for example, you invested in an S&P 500 index fund in December 2007. The market was reaching record highs at the time, but it was about to slip into the Great Recession, which would last until 2009. In that time, your investment would have plunged by more than 50%. Selling at any point during that recession could have locked in significant losses, since you would have likely been selling your investments for far less than what you paid for them. However, if you simply stayed in the market, you would have earned total returns of around 75% after 10 years and 312% by today -- more than quadrupling your money. In other words, even if you had invested at the seemingly worst possible moment -- at record-high prices immediately before one of the most severe recessions in U.S. history -- you would still have made a significant amount of money over time. Now, could you have earned more if you had waited until the market was at its lowest point to buy? Definitely. But hindsight is 20/20, and nobody knows when the next correction or bear market will begin. Timing the market accurately is next to impossible, and if your timing is even slightly off, you could potentially lose a lot of money. Rather than waiting for a chance to "buy the dip," it's often wiser to invest consistently. You can always increase the amount you invest during the next slump, when stocks are at a discount. But in the meantime, continuing to buy can ensure you're not missing out on immediate gains if stock prices stay on the rise. One major caveat to remember The key to ensuring your portfolio survives a downturn is to only invest in long-term quality stocks. Sometimes weak companies can thrive in the short term, earning exponential growth in a matter of months. But those investments are far less likely to pull through tough economic times. Healthy companies with strong business foundations have a much better chance of seeing long-term growth despite short-term hiccups. When a company has a solid competitive advantage, a competent leadership team, robust financials, and a long-term plan for the future, it's much more likely to survive even the worst recessions or bear markets. The most important thing you can do right now, then, is double-check that every stock in your portfolio deserves to be there. Once you're certain that all of your investments have healthy fundamentals, you can rest easier knowing that you're well prepared for whatever may lie ahead. Should you buy stock in S&P 500 Index right now? Before you buy stock in S&P 500 Index, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and S&P 500 Index wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* Now, it's worth noting Stock Advisor's total average return is 1,019% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025 Katie Brockman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. The S&P 500 Has Reached an All-Time High: Should You Invest Now or Wait for a Correction? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
5 hours ago
- Business Insider
Berkshire Hathaway Sells $1.2 Billion in VeriSign, Takes $5 Billion Impairment on Kraft Heinz
Berkshire Hathaway (BRK.A) (BRK.B) reported a $1.21 billion sale of VeriSign (VRSN) stock in a recent filing with the U.S. Securities and Exchange Commission. The transaction, dated July 30, involved the sale of 4.3 million shares. The move was made through a Berkshire subsidiary, Government Employees Insurance Company. The holding now stands at 8 million shares, with a smaller portion held by pension plans of other Berkshire units. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. VeriSign shares have dropped 8.2% over the past month, trailing the broader market. The timing of the sale signals a strategic pullback from a position Berkshire has held for years. Warren Buffett is the controlling stockholder of Berkshire Hathaway but disclaims any beneficial ownership beyond his economic interest in these securities. Berkshire's $5 Billion Impairment in KHC In other news, Berkshire recorded a $5 billion impairment on its stake in Kraft Heinz (KHC) during the second quarter. The company cut the carrying value of its 27.4% stake to $8.4 billion, down from $13.5 billion at the end of the first quarter. The write-down reduced Berkshire's net earnings after taxes by $3.8 billion. Kraft Heinz has lagged peers in performance and is reportedly reviewing strategic options, including a breakup. This is the second impairment tied to Kraft Heinz since 2019. Two Berkshire-appointed board members resigned from the company in May. The move aligns with broader changes underway at Berkshire Hathaway as it prepares for a leadership transition. Earnings Slide, Trade Risks Mount, Leadership Shift in Focus Both developments occurred while Berkshire reported its Q2 earnings. Operating earnings for Berkshire Hathaway came in at $11.2 billion, a 4% year-over-year decline. Net income fell to $12.4 billion from $30.4 billion in the same period last year. The drop reflects the Kraft Heinz impairment and smaller investment gains compared to 2024. Berkshire ended the period with $344 billion in cash and Treasury holdings, slightly down from March levels. The company's cash position remains elevated despite a volatile market. Looking ahead, Berkshire warned of uncertainty tied to global trade and tariffs. It cited increased risks from U.S. policy changes and their potential impact on operations and equity holdings. Leadership changes are also on the horizon. Greg Abel will take over as chief executive in January 2026. Warren Buffett will stay on as chairman of the board. Shares of Berkshire Hathaway are down 12% since Buffett announced his succession plan. The S&P 500 has gained 10% over the same span. Is BRK.B Stock a Good Buy?
