Starbucks (SBUX) turned in a bit of a mess last night.  The company blamed weak consumer spending and high input costs in the form of milk.  Yup, it literally cried over spilled milk. 

Starbucks is thus serving as a great real-time example of why I have disdain for the stocks of companies blaming exogenous forces for their woes.  It's not (just) that it strikes me as whining.  The problem is attributing weak performance to outside forces logically eliminates any justification for buying Starbucks stock.  Starbucks isn't supposed to be a play on milk.  Starbucks doesn't even sell milk.  It gives it away for free.  If I want to play milk I can short Dean Foods (DF).  Starbucks is a play on Starbucks' ability to sell high-margin caffeine related beverages.  It isn't selling enough of those beverages.

Why was Starbucks a sell going into the report last night and a sell even this morning, down almost 10%? It doesn't understand the problem.  Its business model is post-peak and Starbucks stock is too expensive for a slow-growth, commodity pricing play.

Starbucks strikes me as a classic walk-away story.  I don't want to short it, I don't want to try to trade it long.  I don't even want to plug it into my "Search for Starbucks' Soul" grading system.  There isn't any point to the exercise until Starbucks stops crying over the price of the milk it gives away and starts concentrating on what's wrong with the business.

I'll just drink the coffee, use plenty of the free skim milk and ignore the stock as it completes its long-term slide to the low teens.


Venti, Vidi, Vici!

Want more Starbucks?  Check out Hoofy and Boo's video Venti, Vidi, Vici!