Stocks are bouncing along in a subdued manner after finishing up about 1/2 a percent yesterday. This morning, the headlines are going to be all about the ECB and their knock-off QE program. Normally we'd be forced to care about such things. Today, though, I'm leaving the economic navel gazing to Europeans and the self-proclaimed thought leaders of the world at their Swiss clam bake in Davos.
Here in America we've got two of the great consumer brands of all time reporting earnings in the next 24 hours. Trust me on this: What we hear from Starbucks (SBUX) tonight and McDonald's (MCD) tomorrow morning will impact your immediate financial future more than anything coming out of Davos.
Why McDonald's and Starbucks? Because between the two they have nearly 30,000 stores in the United States generating $20 billion. It's worth repeating: That's not including the rest of the world. For the most part those locations are located either just off major roadways or in malls.
We care because Howard Schultz of Starbucks is a retail genius who's been figuring out how to overcome falling mall traffic since before most people had any idea there was a problem. The Street is looking for 80-cents of EPS for the company's earnings tonight and that's fine for traders. I'm more interested in what Schultz has to say about his other initiatives. This is a guy who spent years actually closing locations because they didn't meet his internal quality standard. He's a straight shooter and his company sells extremely discretionary products. Yes, coffee is addictive. But you don't need to pay $6 to get your fix. People line up at Starbucks because they hate-love it. That's just good merchanting.
I hope Starbucks is good not because I own the stock. I don't. I just want to have a reserve of positive energy before I hear from the ongoing tragedy that is McDonald's on Friday morning. This is a company that should be absolutely crushing it thanks to the drop in gas prices. But somehow, someway, McDonald's shares are down 5% since gas peaked in the middle of last year. Where's all that gas money going?
Check out shares of Sonic (SONC), Jack in the Box (JACK) and Wendy's (WEN); all gaining share and making money for investors while McDonald's burns.
Somehow, McDonald's is claiming it's about health fads and fancy consumers. Sonic sells hotdogs and tater tots. Trust me, the country didn't suddenly get too healthy for McDonalds. There's something wrong with the company and I want to hear more about it.
Let the fancy kids in Davos meditate and give each other neck rubs. Our country is led by the consumer and we're about to hear from the two biggest players in addictive roadside food products. Ignore McDonalds and Bucks at your own investing peril.
