Starbucks Corp. (NASDAQ: SBUX) posted poor quarterly results, and its stock fell. When it announced its figures, Starbucks warned that labor costs could hurt results. The unionization of some of its workers could speed up the worsening of that problem.
Revenue dropped 2% year over year to $8.6 billion. Earnings fell 14% to $0.68 per share. Comparable store sales were down 4%, though the store count rose 3% to 18,065.
What about the future? Starbucks mentioned “the impacts of partner investments and changes in the availability and cost of labor including any union organizing efforts and our responses to such efforts.” The labor cost figure may be as important in raising Starbucks’ costs over time as the inflation in prices of ingredients like cocoa.
Starbucks is negotiating with its unions, represented by Workers United. At this point, hourly workers at about 400 stores are involved, which is not a large part of Starbucks’ total. Presumably, workers at other stores will join them as well, particularly if the results are good for labor.
Unions are not the only labor issue. California recently raised the minimum wage from $16 an hour to $20. There is no one with whom the coffee company can negotiate. The decision is set in stone. Twenty-two states increased their minimum wages in January. Many of the laws that triggered these increases also have future hourly increases. (See which coffee brands consumers are not avoiding in 2024.)
Starbucks may need help to draw enough new customers or raise prices enough to offset the cost of its workers in the United States. If so, its margins will be threatened permanently, affecting its stock price.
∴
ALERT: Take This Retirement Quiz Now (Sponsored)
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
