Here’s What We Are Watching For In Starbucks’ Q1 2018 Results

Starbucks (NASDAQ: SBUX) will announce its Q1 2018 results on Thursday January 25^th 2018 and after the company lowered its long term growth target (as part of the  fiscal year 2017 results announcement), we will be keenly watching the comparable sales — especially customer traffic and revenue growth figures for Q1 2018.

Analyst expectations for revenue and EPS (earnings per share) for this quarter are higher compared to the previous two quarters and the same quarter in the last year.  The below charts summarize consensus analyst expectations:

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While the company has lowered its growth estimates, Starbucks is taking several measures to drive growth as it struggles with a decline in customer traffic.

In its Q4 2017 earnings call, the company announced that it is opening up its mobile ordering platform to all its customers irrespective of their membership in the company’s rewards program. This move is likely to bring a larger customer base into the company’s digital umbrella and can drive traffic. (Read Here’s How Opening Up Its Mobile Order& Pay To All Customers Can Impact Starbucks)

The company also launched a co-branded Visa credit card in partnership with Chase allowing customers to earn reward points on their transactions inside and outside of Starbucks. (Read Here’s How Starbucks “Financial Services” Products Can Drive Growth For The Company).

The overall restaurant industry has been positive for the quarter ended December 2017.

While guest traffic has been declining, guest check size has accelerated in fine dining and upscale casual restaurants. Top restaurant brands are likely to perform better in 2018 and Starbucks will benefit from this trend. Further, the company’s focus on food and aggressive expansion in China is likely to be a key growth driver for the company.

Overall, Q1 2018 is likely to be a positive quarter for Starbucks. We will be keenly watching the growth in comparable sales and may review  our current price estimate of $52 for the company, after these results are announced.

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