Starbucks Posts Terrible 5-Year Return
Starbucks once seemed unstoppable, expanding from 16,000 stores to 38,000 in just six years, yet something quietly broke along the way. A new CEO, a reshaped menu, and a bold bet in China have done little to convince shareholders that…
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For years, Starbucks (NASDAQ: SBUX) was a growth company and a growth stock. In 2016, it had about 16,000 stores, including company-owned and franchised locations. By 2022, it had reached 38,000 stores, and that growth began to flatten. Investors started to beat down its shares at the same time. Comparable sales, which also suffered, have begun to grow after a period of decline. That has not been enough. Shares are down 16% over the last five years. The S&P 500 is 75% higher. Could it be worse? Sure, but not by much.
What are investors seeing? Growth stopped. One problem was revenue. The other was comparable store sales. However, in the most recent quarter, comparable store sales rose 7.9%. But revenue was flat at $9.3 billion. It showed progress and was enough to give the stock a bump, but it was not sustainable.
And Starbucks abandoned its primary global growth initiative. Boyu Capital in China took a 60% stake. Starbucks kept 40% and “continues to own and license the brand and intellectual property to the joint venture.” The venture set a goal of reaching 20,000 stores from the current 8,000. However, what evidence is there that a new controlling shareholder can do that? Local coffee store leader Luckin’ Coffee has 35,000 stores worldwide, most of which are in China.
Some hoped new CEO Brian Niccol could carry over success from his last job at Chipotle (NYSE: CMG). He began by closing underperforming Starbucks locations, setting a dress code for local store staff, making modest personnel cuts, removing low-performing items from the menu, and reducing customer wait times. Shareholders viewed this as window dressing. The stock is down 10% in the last month.
How many investors believe Starbucks can end its five-year stock slide? Not many.
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