What happened
Shares ofStarbucks (SBUX 0.12%) sank on Friday after the coffeehouse leader's sales and profits failed to meet investors' expectations. As of 1:35 p.m. ET, Starbucks' stock price was down more than 3%.
So what
Starbucks' revenue rose 8% year over year to $8.7 billion in its fiscal 2023 first quarter ended Jan. 1. That was slightly below Wall Street's estimates, which had called for sales of nearly $8.8 billion.
Widespread coronavirus outbreaks across China weighed heavily on the restaurant company's results. Starbucks' comparable-store sales in China plunged 29%.
"In early December, zero-COVID was lifted, and COVID infection spiked across China, resulting in a dramatic decline in consumer activity across the country and causing the most severe COVID disruptions any retailer had encountered," interim CEO Howard Schultz said during a conference call with analysts. "For us, at its peak, nearly 1,800 Starbucks stores were closed during that month."
The steep downturn in China was offset by strong growth in the U.S. and other international markets. Store openings also contributed to Starbucks' revenue gains.
All told, the coffee giant's adjusted earnings increased by 4% to $0.75 per share. That, too, was slightly below analysts' projections, which had called for adjusted per-share profits of $0.77.
Now what
Starbucks expects COVID to continue to weigh on its results in its fiscal second quarter. Chief financial officer Rachel Ruggeri said comp sales in China were down roughly 15% in January.
"However, our long-term opportunity in China is very strong," Ruggeri said. "We expect the market to see meaningful sales rebound once recovery is in full swing."
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends the following options: short April 2023 $100 calls on Starbucks. The Motley Fool has a disclosure policy.
FAQs
A COVID-driven profit shortfall drove investors to sell.
Why is Starbucks stock crashing? ›
Starbucks CEO Laxman Narasimhan blamed three headwinds for the disappointing results: war in the Middle East weakening its local licensees' sales, “misperceptions” in the U.S. over the company's stance on the Israel-Hamas war, and a “more cautious” consumer in China.
Why is Starbucks losing market share? ›
One of the major and most recently publicized reasons for this decline may be attributed to Starbucks' treatment of workers, their wages, workload, and desire for unionization. Employees at Starbucks have been voicing concerns about their working conditions and have tried repeatedly to unionize.
What do experts say about Starbucks stock? ›
On TipRanks, SBUX stock comes in as a Moderate Buy. Out of 25 analyst ratings, there are 10 Buys and 25 Hold recommendations. The average SBUX stock price target is $107.30, implying upside potential of 21.7%. Analyst price targets range from a low of $95.00 per share to a high of $127.00 per share.
Is it smart to buy stock in Starbucks? ›
Its a mature business, but there's still room for growth. Many investors worry that they might have missed the biggest gains in Starbucks (SBUX -0.35%) stock. That's not due to any recent price spike, of course. The coffee titan's shares sat out of the 2023 stock market rally and are down over the past full year.
Why Starbucks is suddenly struggling? ›
Higher costs
It has to, with labor costs going up, especially in the chain's more urban markets. Again, price increases tend to drive away less loyal traffic the most, and that's been Starbucks' biggest problem.
Why is Starbucks struggling? ›
Starbucks is facing a multitude of challenges, from labor and supply shortages to inflation and internal union battles. Howard Schultz has a tough road ahead to turn the company around. The choices he makes will not only affect the company's short-term profits but also its long-term reputation.
Why is Starbucks being boycotted 2024? ›
In the first quarter of fiscal year 2024, licensed stores revenue increased by only 6.5%, compared to a 31.6% increase in 2023 and 38.6% increase in 2022. The boycott movement began when Starbucks Workers United, a labor union of Starbucks baristas, tweeted in solidarity with Palestine in October.
Is Starbucks losing money 2024? ›
Starbucks Earnings: 2024 Guidance
However, Starbucks now projects 2024 revenue growth in the range of 7%-10%, down from its previous range of the low end of 10%-12%. Starbucks is also predicting full-year global and U.S. comparable sales growth in the range of 4%-6%, both revised from the previous range of 5%-7%.
Why is Starbucks tanking? ›
However, Starbucks faces headwinds that include rising costs related to labor, commodities, and supply chain issues. There are also concerns about consumer spending, as inflation remains high. The potential for higher-than-average growth is there, but the macroeconomic climate poses headwinds.
Vanguard owns the most shares of Starbucks (SBUX). The ownership structure can impact the company's decision making, as large institutional investors may exert influence on the company's management and can also affect the company's stock price with their buying and selling patterns.
What is the future of Starbucks stock? ›
Stock Price Forecast
The 21 analysts with 12-month price forecasts for Starbucks stock have an average target of 108.29, with a low estimate of 90 and a high estimate of 150. The average target predicts an increase of 23.06% from the current stock price of 88.00.
How much stock do you get as a Starbucks employee? ›
As long as you remain employed by Starbucks, you'll receive half of the shares one year after the grant date. If you remain employed for two years after the grant date, you will receive the other half. What happens to my Bean Stock if I leave Starbucks? Any shares you hold from vested Bean Stock are yours to keep.
Is it safe to invest in Starbucks? ›
Cash flow is ample and supports the company's higher spending on growth initiatives along with its rising dividend payment. Starbucks also spent $1.3 billion repurchasing its stock, up from about $200 million a year ago.
Is Starbucks a buy, sell, or hold? ›
Under current conditions, investors should probably treat Starbucks stock as a hold. Its massive footprint and powerful global brand bring it stability, and the continued revenue and comparable-store sales growth show that it holds up well against intense competition.
Should I hold Starbucks stock? ›
Is Starbucks stock a Buy, Sell or Hold? Starbucks stock has received a consensus rating of hold. The average rating score is Baa1 and is based on 45 buy ratings, 52 hold ratings, and 1 sell ratings.
Is Starbucks still a good stock to buy? ›
Is Starbucks stock a Buy, Sell or Hold? Starbucks stock has received a consensus rating of hold. The average rating score is Baa1 and is based on 44 buy ratings, 53 hold ratings, and 1 sell ratings.
Is Starbucks a risky stock? ›
Risk Analysis of Starbucks Corporation ( SBUX | USA)
Starbucks Corporation shows a Risk Score of 9.00. The Risk Score for Starbucks Corporation is significantly higher than its peer group's.
Is Starbucks stock expected to go up? ›
Stock Price Forecast
The 21 analysts with 12-month price forecasts for Starbucks stock have an average target of 108.29, with a low estimate of 90 and a high estimate of 150. The average target predicts an increase of 23.06% from the current stock price of 88.00.
