On Thursday, I discussed how completely opposite the stories are between Starbucks (SBUX) and Sears (SHLD). That was clearly on display with Sears posting another disastrous quarter and Starbucks unveiling a future of cool mobile ordering and new, yummy food. The diverging stories of these companies further illuminate potential investments and traps to avoid.
Starbucks held its biennial investor event Thursday. Why is this event always a major spectacle? Well, for starters, it only comes around every two years. Second, the platform is often used by CEO Howard Schultz to discuss the future of Starbucks.
While Starbucks' new express order platform and same-day delivery service that will roll out in 2015 stole the show, some other interesting things were shared. Collectively, the series of initiatives should have Dunkin' Brands (DNKN) and McDonald's (MCD) concerned. Conversely -- and, admittedly, this is a little out there -- Apple (AAPL) could benefit from Starbucks' mobile app investments. As Starbucks' express ordering and delivery become the industry norm, consumers with ill-equipped smartphones are likely to trade up to an Apple product to gain the new convenience option.
First, Starbucks opened its first Reserve brand store in Seattle. Indeed, the company has created a new brand, one meant to offer a more premium coffee experience compared to Starbucks. Hundreds of these stores will open over the next five years; the first one in China arrives in 2016.
Second, the company hinted that bagged coffee and other merchandise found near the register could be bought soon by simply scanning it with your smartphone. I think that will lead to incremental same-store sales over time.
Finally, the company sees the potential for hundreds of mobile stores going forward -- mobile meaning giant Starbucks trucks that hop from one busy location to another.
Now for Sears. There is no better way to describe its quarter than to pull comments from CEO Eddie Lampert and CFO Robert Schriesheim's lame pre-recorded earnings call. Here are few tasty quotes that highlight the company's fundamental challenges:
"The fact of the matter is that a number of our stores are simply in the wrong place and are often too large for our needs. Restoring these locations to profitability is unlikely."
Analysis: In countless cases, the company is going to be leaving communities altogether. Winners will include dollar stores and even publicly traded pharmacies such as Walgreen (WAG) and CVS Health (CVS).
"With this thinking in mind, year-to-date, we have closed 129 stores and for the full year, we currently expect to close a total of about 235 stores."
Analysis: The company will likely close 250 or more stores in 2015. It has too, and again, that leaves a massive sales opportunity for Walmart, Target, and Best Buy.
"Our electronics business continues to negatively impact the Sears format. We are addressing this decline by transforming the business from one which is focused primarily on selling TVs into a business focused on providing connected solutions for our members."
Analysis: Sears is lying to investors and you the consumer. There is no transformation going on in the Sears electronics department, which is disturbing as we are in a golden age of tech (connected home gear, smart TVs, large screen smartphones, etc.). Want a transformation? Check out the sales floor of your local Best Buy with all of its new, snazzy looking shops from Sony, Samsung, and now Canon.
"The consumer electronics and grocery & household business continue to negatively impact the Kmart format, which we intend to address moving forward as part of our transformation."
Analysis: When I see steak in a Kmart, like what's happening at Walmart and Target, then it will pique my interest the company "gets it." No steak, I meet anything regarding a turnaround in Kmart's food business with pure skepticism.