[Note: Starbucks’ fiscal year 2021 ended October 3, 2021]
Starbucks’s stock (NASDAQ: SBUX), the world’s leading roaster, marketer, and retailer of specialty coffee, declined by 4% in the last five trading days (one week). Similarly, the broader S&P500 index also declined by 4% over the same period. There is a slowdown in demand and rising costs are significantly affecting Starbucks’ profits. It is possible that these headwinds won’t persist over the long term, and business returns to normal as inflation gradually subsides. However, the effects of unionization may create long-term costs for the organization. It’s still too early to tell how the unionization efforts will affect the bottom line since they are relatively new. There are more than 15,000 Starbucks stores in the U.S., so unionization is viable in many of them.
Starbucks announced a reinvention plan last week to tackle unionization and stalling growth. The company laid out a three-year financial roadmap, with the goals of delivering 7% to 9% comparable sales growth annually, 10% to 12% revenue growth, and 15% to 20% growth in adjusted earnings per share. It means to do that through increased store count, disciplined capital allocation, and expanding its margins. A large chunk of the investments will increase wages and offer more benefits, in order to head off unionization efforts as well as stem employee turnover. The rest of the investments will focus on drive-thru only, pickup only, and delivery only, as well as enhancements of regular stores. As for store count, Starbucks plans to grow its store count in China by 50% over the next three years to reach 9,000 stores. Also, the company hired Laxman Narasimhan to take over as CEO. He will join as co-CEO with Howard Schultz starting in October and take the responsibility solo in April 2023.
In Q3 (ended July 3), Starbucks’ operating expenses rose by 13% year-over-year (y-o-y) but revenue by only 9% y-o-y to $8.2 billion. Consequently, its net earnings fell 21% to $913 million. It should be noted that the company’s global comparable-store sales rose 3%, but that was mainly due to a higher average ticket – which was up 6% while comparable transactions declined by 3%. China’s comparable numbers in Q3 were down significantly due to lockdowns (sales declined 44% on a comparable basis) and weighed down Starbucks’ numbers. Even in North America, comparable transactions were still up just 1% this quarter versus 5% a period earlier. In response to rising inflation, Starbucks has raised its prices multiple times since last October.
Is SBUX stock poised to decline in the short term or are gains looking more likely? Based on our machine learning analysis of trends in the stock price over the last ten years, there is more than a 70% chance of a rise in SBUX stock over the next month (twenty-one trading days). See our analysis of SBUX’s Stock Chance Of Rise for more details.
Calculation of ‘Event Probability’ and ‘Chance of rising’ using last ten years’ data
 Returns of -4.4% or lower over a five-day period on 186 occasions out of 2515 (7%); Stock rose in the next five days in 109 of these 186 instances (59%)
 Returns of 0.3% or higher over a ten-day period on 1478 occasions out of 2515 (59%); Stock rose in the next ten days in 853 of these 1478 instances (58%)
 Returns of 4.3% or higher over a twenty-one-day period on 810 occasions out of 2514 (32%); Stock rose in the next twenty-one days in 567 of these 810 instances (70%)
It is helpful to see how its peers stack up. SBUX Peers shows how SBUX stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.
With inflation rising and the Fed raising interest rates, SBUX stock has fallen a bit more than the S&P index so far this year. Can it drop further? See how low can SBUX stock go by comparing its decline in previous market crashes. Here is a performance summary of all stocks in previous market crashes.
|S&P 500 Return||-4%||-20%||69%|
|Trefis Multi-Strategy Portfolio||-6%||-21%||213%|
 Month-to-date and year-to-date as of 9/22/2022
 Cumulative total returns since the end of 2016
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