Starbucks Is Boring
If Starbucks earnings were a sign of a turnaround, the share price is not showing it. Sales grew, but not enough to impress investors.
Some investors said that Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) earnings were a sign of a turnaround. Yet, the stock fell 1.35% to $93.88 per share the day after those results were announced. The share price was down again before the market opened today. A 4% increase in comparable store sales is not like the good old days. Revenue in the most recent quarter rose 6% to $9.9 billion, and per-share earnings fell 19% to $0.56.
The stock is down 14% in the past year, while the S&P 500 is 14% higher. In the past five years, it is down 3%, compared with the S&P 500’s 87% gain.
Investors remember when Starbucks was a growth company stock. That was as recently as 2021, when the stock price was $120. It is $94 today and going nowhere.
“Our Q1 results demonstrate our ‘Back to Starbucks’ strategy is working and we believe we’re ahead of schedule,” according to CEO Brian Niccol. Compared to quarters when comparable sales were falling, he is right. It will require more proof to show that growth is accelerating and sustainable.
The Niccol plan seemed to do some things right. Middle management is slimmer. People in the stores wear clothing that looks similar. Starbucks does not tell investors how quickly customers receive food and drinks now, compared to a year ago. Anecdotally, service has improved. Stores are becoming more customer-friendly, and that work will continue.
What the market has told Starbucks management is that 4% is not impressive.
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