Despite a strong start to the year for the stock markets, investors are holding back Starbucks (NASDAQ:SBUX) are bitterly disappointed as the shares were down about 20% at the time of this writing.
After the earnings miss, Laxman Narasimhan, Starbucks’ new CEO, appeared on Jim Cramer’s Mad Money to explain both the results and the company’s path forward.
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Much of the discussion focused on whether Starbucks’ premium coffee is too expensive, with Jim Cramer asking early in the interview whether the coffee might be “just too expensive.” In response, Mr Narasimhan admitted: “We have not been able to communicate [the occasional customer] the value we provide,” while emphasizing that his core customers still saw value.
Some commenters noted the irony that Starbucks’ expensive coffee offered any value, saying, “Mocha went from $4.75 at my house to $6.25 in 24 months. Was already too expensive before the price hike. That’s why you bad quarter.”
Meanwhile, others praised Jim Cramer for the intensity of the interview, with one YouTube user saying: “Wow, Cramer actually tested an executive.”
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Of course, Jim Cramer may have shown additional frustration, since he owns shares of Starbucks. Despite Cramer’s disappointment that management has not warned investors about the deteriorating performance of the company’s financials compared to their previous earnings expectations, he still plans to hold the stock for now.
Although Mr. Narasimhan has only been CEO for a little more than a year, he has struggled to escape the shadow of his highly successful predecessor, Howard Schultz, who was CEO of Starbucks for three separate stints and remains its largest shareholder.
In a LinkedIn post published by Mr. Schultz, he identified areas where the company would need to make improvements, specifically saying that “the company’s solution must start at home: US operations are the main reason for the company’s fall from the grace,” and that “the stores require a maniacal focus on the customer experience, through the eyes of a merchant. The answer lies not in the data, but in the stores.”
Not only was Jim Cramer “stunned” by the bad quarter, he was also surprised by the candor of the company’s former CEO, who said it was unlike anything he had ever seen before.
Whether Howard Schultz feels the need for his fourth stint as CEO of Starbucks remains to be seen. Shareholders, including Jim Cramer, are losing patience and eagerly waiting to see whether Starbucks’ turnaround plans will bear fruit.
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This article Jim Cramer blasts Starbucks’ new CEO in heated interview, says he was “stunned” when former CEO admits there was a “fall from grace” originally appeared on Benzinga.com
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