Jim Cramer criticized Starbucks CEO Laxman Narasimhan in a CNBC interview after the company reported a disappointing quarter and missed on guidance, causing a more than 15% drop in the company’s shares. In the interview, Cramer questioned Narasimhan about why investors should continue to hold Starbucks stock, to which the CEO responded by acknowledging the tough quarter but highlighting an action plan to address the challenges. Despite Narasimhan’s reassurances about the company’s strong foundation and upcoming product offerings, Cramer expressed disbelief and distress over the situation, emphasizing the importance of trust in the CEO’s communication.
Narasimhan attributed the poor quarter to challenges in China and unfavorable weather in the United States, outlining an action plan focused on attracting more occasional Starbucks customers. Cramer challenged Narasimhan on the company’s expansion plans, pointing to negative trends observed at competitors like Tim Horton’s, McDonald’s, and Dunkin’ Donuts. Narasimhan defended Starbucks’ performance, highlighting growth in markets such as Latin America and Japan, as well as the loyalty of its customer base despite declines in loyalty program users and wait times for online transactions. He also mentioned improvements in app wait times as part of the company’s efforts to address these issues.
Following the CNBC interview, Cramer reflected on his past interactions with Narasimhan and expressed doubts about the CEO’s ability to navigate Starbucks through its current challenges. As a result, Cramer’s Charitable Trust downgraded Starbucks to a rating of 2 and reduced the price target to $90 per share. The club’s director of portfolio analysis, Jeff Marks, noted that the market had anticipated a miss in Starbucks earnings, but the stock had not reacted negatively to the previous quarter’s miss. Marks also highlighted the importance of being prepared for such outcomes in volatile markets.
In the midst of the company’s struggles, Narasimhan remains confident in Starbucks’ ability to rebound, citing upcoming product launches and growth opportunities in key markets. Despite the challenges faced by the company, Narasimhan’s focus on addressing customer concerns and improving operational efficiency indicates a commitment to overcoming obstacles. As Starbucks works to regain investor confidence and navigate through a challenging business environment, the scrutiny from analysts like Cramer and the CNBC Investing Club underscores the importance of transparent communication and strategic leadership in driving long-term success.
