A Quality Asset

Quality of the asset is of significance when it comes to #valueinvesting. Under a cloudy sky, it is even more so. #SBUX is one of those names in consumer universe that I feel the need to follow closely.

What makes #SBUX a quality asset?

The question that should be asked in the boards of all consumer/restaurant players around the world I believe.

A couple of elements relevant to #SBUX through my lens:

> Managing expectations of its own people well. “Because if we want to exceed the expectations of the customers, we have to exceed the expectations of our people” (Schulz explaining further increases in wages beign “ahead of the curve” at discussion of F2Q22 results)

> Ensuring customer continuity. Hugely successful Rewards programme which currently has 27.4Mn members in the US! By F3Q22, the spend by rewards members is at record levels. %58 of revenues come from Rewards members which showes huge #brandloyalty, which is challenging to create in restaurants/ food retail universe. What I like (for cash flow yield) in the Members program is the following: Customers #prepaid $11Bn of their purchases in 2021!

> Cash-on-cash returns (what a shareholder could like to see more?). It is around 70% at F3Q22. ROIC being 101%.

Going through F3Q22 numbers, one should note that US SSS of 9% is not a great performance compared to its universe where +15% is average topline growth in the same quarter. However, I liked the shift to cold beverages (75% of the beverages) which is difficult to replicate at home and higher partner engagement scores which has a track record of converging into SSS.