How Starbucks, Disney, Gap plan to restructure in 2024

Some major companies are entering the new year with new strategic plans aimed at revitalizing their businesses after challenges in 2023. Yahoo Finance's Brian Sozzi and Brad Smith break down the 2024 plans for Starbucks (SBUX), Disney (DIS), and Gap (GPS).

Starbucks has laid out a 3-year plan to unlock $3 billion in efficiencies while also trying to repair partner culture amid unionization efforts.

Disney has announced workforce reductions to control costs under returning CEO Bob Iger, who faces activist pressure to invest more in high-potential areas like parks.

Gap starts the year with new CEO Richard Dickson at the helm following store closures and sales declines. With a marketing background, Dickson may unveil a restructuring within 6-12 months to catalyze a turnaround.

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Video Transcript

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BRIAN SOZZI: 2023 was the year of change, with companies touting plans to evolve their business for the future.

Starbucks announced its triple shot reinvention back in November, as it strives for long-term growth. I guess that's a well named hat tip to the Starbucks marketing department for cooking that one up. But if you go back to this release on what this reinvention plan is, two things stick out to me or really stand out to me that Starbucks has to start delivering on next year, if this stock is going to come off the lows. Really dreadful year for Starbucks investors.

One, unlock efficiency. As part of this plan, Starbucks trying to generate $3 billion in savings over 3 years, $2 billion of that outside the store. So things it's doing outside of its own stores that are probably wasteful, make no sense, and should be cut.

And then number two, reinvigorate, Brad, the partner culture. And this is really speaking to I think the ongoing union issues that continue to plague Starbucks. I think some folks could easily make the argument they continue to get worse. Bottom line for me is that they are not going anywhere.

And like we said yesterday and even earlier in the week, Starbucks has to address this. Get it done and dusted once and for all whatever that might mean, but probably come at the expense of the company's bottom line.

BRAD SMITH: So here's some of the benchmarks that you can read Starbucks up against, especially for this reinvention plan-- the triple shot reinvention plan, as you mentioned a moment ago. As the company has set out some of these goals. Growing comps by 5% to 7%, with revenue growth at the low end of the 10% to 12% range. Earnings growth of 15% to 20%. You can grade them on that based on some of the prevailing trends that they set guidance for fiscal 2024.

Bottom line here though, you got to think about the international relevance of this brand as well. They're talking within this plan about what's the growth needs to look like both here domestically but as well as internationally and in the core market of China.

And so one of the huge things that is important to remember is especially across some of the plays that can be looked at like a Starbucks, where you still need to have a strong corporate and also relationship with the franchisees, the partners as they call them, where those partners might be tough to find, especially in a tough purchasing or tough financing environment like we're in right now. And perhaps that's only going to get more difficult for the company going into next year.

BRIAN SOZZI: Just give me a cheaper iced coffee, Starbucks.

BRAD SMITH: I just want the unicorn frappe to come back. Also, let's talk about a magical place, Disney. Less magical this year. They launched a reinvention plan of its own with Bob Iger back at the helm, starting with job cuts. Those job cuts coming early in the year.

This was a way that Bob Iger was trying to signal to the activist campaigns that were coming out of nowhere like Dikembe Mutombo blocking a shot that was unexpected for any basketball players out there. You know the reference. The finger-wagging, the activist campaigns were essentially throwing at Disney as well as the statistics.

At the end of the day, that was his own type of efforts to try and say, hey, I've got a handle on costs. I have a handle on getting back to profit. And, oh, yeah, by the way, we might be thinking about a life without ESPN here at Disney. That's still some of the larger questions that lingered.

And even after that later on in the year you saw this company hit, what, eight year lows. So a lot of these questions still linger, as well as just I think longer leadership question at the company of who's after Iger at the end of the day because that's still unclear at this point.

BRIAN SOZZI: And what do you do with these legacy assets. Now, we're still watching Paramount reportedly shopping itself, whether they go to Warner Brothers Discovery. That is to be determined.

But it's one thing for investors to speculate and analysts to speculate, sure, sell off your legacy TV assets like ABC, Disney. But who is buying it? You have to have a willing buyer, and it has to come at a good price. You just don't say, hey, we're going to just unload these assets and they're just going to float out there in the ether sphere.

And I just think, Brad, it's going to be hard for Iger to do this because it would be him acknowledging that he didn't see this coming 10 years ago. And he would really I think hurt his legacy if he were to spin off these assets.

BRAD SMITH: And at the end of the day too, you've got to think about what they're going to do to continue to invest in some of the businesses that they've signaled that they're going to develop even more on top of, I think most notably at the parks and resorts business. More expansion internationally. More development upon the thousands of acres of land that they've got in Florida that are undeveloped at this point too. So that's more money that's potentially going out the door.

But to buy into or to spend into an experience where they're already going to be charging the customer more. And that's another element where the customer is going to have to grapple with how much are we comfortable to pay for those magical passes that allow us to skip the line when we go to Disney World.

BRIAN SOZZI: So true. All right. And lastly, and Gap. The company has struggled to connect with consumers, but its new CEO is looking to change that. And, Brad, look, I've been very critical of Gap for going on over 10 years, sales have just been dreadful. Margins dreadful. They've closed hundreds of stores.

And it's not just the Gap division. It's been the Old Navy division. The Banana Republic division sometimes call falls into favor with investors. But now the new CEO Richard Dickson, really the guy who saved Mattel now at the helm over at Gap.

And I've had the time, I've had a moment to just connect with Richard on just to get a sense of what he might be focusing on for 2024. I do think you will see an investor day from Gap at some point middle of next year, where they try to reset the investor narrative for the company.

But as I've learned covering CEOs for a long time, any new CEO is likely within their first 6 to 12 months come out with some form of restructuring plan. I think that is going to be a key initial playbook by Richard, whether it is closing more stores, fine tuning its manufacturing capacity. I do think that plan will hit in the first half of next year.

And then secondarily, what Richard does very well is marketing. He is a marketing whiz, but he also, I think he understands the apparel industry, having spent a long time over at Jones Apparel Group. I think he will bring more stylish things that human beings want to actually buy from a Gap and Republic inside of their stores next year. But again, a big turnaround in a tall ask to drive that turnaround over at Gap.

BRAD SMITH: Does it mean from your perspective because you've covered this company for a long time. Does it mean that they need to grow up another in-house brand? And I think about what they're doing that started off as a relevance and kind of collaboration partnership with Dapper Dan and starting Gap underneath of Gap and having a few hoodies there. But now they're expanding that into a kid's clothing line. Does it need another kind of reinvigoration of the brand with another subsidy within there?

BRIAN SOZZI: All three a curveball. I think Gap and Richard, they have to go back and consider splitting the company back up now. This is on the table a couple of years ago. Prior management ultimately decided not to do it. I just think it would be more value creating for these brands to trade on their own merit, and ultimately that would drive more focus with each brand. Gap is focused on Gap. Banana is focused on Banana. And Old Navy of course, focused on Old Navy.

We also want to talk about one more stock that's striving for its own reinvention plan. That's Beyond Meat. My team letting me mention this yet again. Stock really shot up over 8% about a half an hour ago on our analysis. Of course, we had a really exclusive interview with Beyond Meat founder and CEO Ethan Brown.

Stock pulling back a little bit. But nonetheless, I think Ethan is trying to figure out what gets more people back into the plant-based meat category and something that Peter McGinnis, his counterpart, the CEO of Impossible Foods, is trying to do as well.

BRAD SMITH: Got to just ask yourself, has it bottomed out? I mean, this is a company in Beyond Meat that it was really a gauge for another company in Impossible Foods, which at the time was a unicorn. I don't know what their valuation is at this point. It's kind of fallen into obscurity at this juncture.

But for Beyond Meat, still the closest thing that anybody in the market has to look at as an alternative meat play that is out there and has its own operations now and that is trying to get more partnerships, both on the wholesale partnership side, going into more of the retail footprints.

And then on the restaurant side, trying to drum up even more demand for beyond what beyond bacon, egg, and cheese in the morning or beyond sausage, egg, and cheese. I don't even know if they do bacon yet. But at the end of the day, it's going to require them to get into more meats.

BRIAN SOZZI: Yeah. More meats.

BRAD SMITH: More meats.

BRIAN SOZZI: It's going to come.

BRAD SMITH: More meats for you.