Recent Posts

SBUX: Multiple Advantages vs. Unions

While we continue to view unionization of some U.S. company-owned Starbucks stores as offering zero meaningful positives from the perspective of Starbucks (and its shareholders), it is important to remember multiple key advantages that Starbucks has and that are likely to persist for many, many years to come. Bottom line: while a modest amount of U.S. company-owned Starbucks stores are likely to be unionized at any given time (200+ at present, out of approximately 9,000 total), Starbucks is unlikely to be meaningfully impacted adversely, other than so-called “headline risk,” the worst of which may already be over. Here are some key reasons why:

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7:00 AM

SBUX: Onward to the 9/13 Analyst Meeting

After today’s (Tuesday’s) market close, Starbucks reported adjusted fiscal Q3 (calendar Q2) EPS of $0.84, close to our $0.85 forecast, and ahead of sell-side consensus (according to Consensus Metrix) of $0.77. That said, on today’s conference call, management noted that fiscal Q3 EPS was helped by about +5 cents due to what it called “non-recurring benefits,” citing multiple factors including tax credits and government subsidies. Other than these non-recurring factors, the fiscal Q3 EPS outperformance relative to consensus was helped by better flow-through in the North American business (thanks in part to a more stable operating environment), as well as better-than-expected performance in Japan.

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8:04 PM

SBUX (Post-Call): Bold Moves Planned to Address Challenges

After today’s market close, Starbucks reported adjusted fiscal Q2 (calendar Q1) EPS of $0.59. This was better than our $0.54 forecast (which we had lowered in March due to Covid-related issues in China), and matched sell-side consensus (according to Consensus Metrix) of $0.59.

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7:10 PM

SBUX: Updating Our Estimates to Reflect Omicron’s Rise in China

Earlier today, Yum China (YUMC; Not Rated) provided a business update in which it said that while its same-store sales were down by about -4% over January/February, they had “decreased approximately -20% year-over-year for the first two weeks of March” and were “still trending down in recent days.”

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12:40 PM

SBUX (Post-Call): Tom Brady Retires; Starbucks’ Margins Squeezed. Coincidence?

After today’s (Tuesday’s) market close, Starbucks reported fiscal Q1 (calendar Q4) adjusted EPS of $0.72, falling short of our $0.77 forecast and sell-side consensus (according to Consensus Metrix) of $0.80. Starbucks indicates that the earnings shortfall was “impacted by greater-than-anticipated inflation, Covid-19 related pay, and staffing costs” including training and the onboarding of new partners. Management also comment that there “was a rapid change in transportation costs” which led to supply-chain delivery-related costs that “rapidly accelerated in December.” That doesn’t bode well for calendar Q1. Management says it “expects these [challenges in general] to persist in the near term.”

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6:17 PM

SBUX: A Sizable Beverage Opportunity for Starbucks

Over the last 50 years, Starbucks has built itself up from a single store in Seattle’s Pike Place Market focused on selling high-quality coffee beans, to the most innovative beverage company in the entire restaurant industry (and the second-largest restaurant concept in the U.S., as measured by domestic systemwide sales). But this gigantic success story does not imply that there aren’t any large opportunities remaining for Starbucks. In our view, there remains an opportunity for Starbucks to sell much more in the way of… keep reading!

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7:00 AM

SBUX: Updating Our Same-Store Sales and EPS Forecasts

Given better-than-expected retail foodservice sales in general during calendar Q2 — Starbucks’ fiscal Q3 — we raise our fiscal Q3E Americas same-store sales forecast to +78% (from +72%). Given the fiscal Q3 2020 figure of -41%, our updated +78% projection implies a two-year number of about +5%. We would also note that embedded within our updated Americas forecast for fiscal Q3E is a U.S. same-store sales projection of +83% (up from +77%).

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4:23 PM

SBUX (Post-Call): Percolating Sales, Earnings, and Loyalty Program Growth

Earlier today, Starbucks reported fiscal Q2 (calendar Q1) adjusted EPS of $0.62, surpassing our $0.53 forecast and sell-side consensus (according to Consensus Metrix) of $0.53. Starbucks bumps up its fiscal 2021 target range for adjusted EPS to $2.90-$3.00 (from $2.70-$2.90). Sources of the fiscal Q2 EPS outperformance include: (1) better-than-expected Product and Distribution Costs/Total Net Revenues (29.9% actual vs. 31.2% estimated), (2) better-than-expected Store Operating Expenses/Company-Operated Store Revenues (49.9% actual vs. 51.8% forecasted), and (3) D&A/Total Net Revenues (4.6% actual vs. 4.9% projected).

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4:51 PM

SBUX: Updating Our Same-Store Sales and EPS Estimates

Ahead of Starbucks’ fiscal Q2 earnings release planned for after the market close on Tuesday, April 27th, we raise our fiscal Q2E U.S. same-store sales forecast by +1 percentage point, to +9%. According to Consensus Metrix data, this places us as the “high forecast on the sell-side” in this regard. As of this writing, sell-side consensus for fiscal Q2E U.S. same-store sales is at +6.7%, although remember that Starbucks does not report its same-store sales out past the decimal point.

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4:44 PM

SBUX (Post-Call) Starbucks’ Brand Power Asserting Itself

After today’s market close, Starbucks reported adjusted fiscal Q4 EPS of $0.51, ahead of our $0.33 estimate and sell-side consensus (according to Consensus Metrix) of $0.31. Factors in the EPS beat included: (1) a favorable tax rate (approximately 14.3% actual, vs. our 26.0% forecast), (2) better-than-expected Store Operating Expenses/Company-Operated Retail Sales (51.9% actual vs. our 54.7% forecast), and (3) better-than-anticipated G&A/Revenues (6.0% actual vs. our 6.9% forecast), partially offset by other factors (such as D&A/Revenues of 5.9% actual vs. our 5.3% projection).

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12:00 AM

SBUX Updating Estimates Ahead of 10.29 Earnings Release (and Tidbits)

Starbucks plans to report its fiscal fourth-quarter earnings after the market close on Thursday, October 29th. Ahead of that release, we move up our fiscal Q4E U.S. samestore sales forecast by +2 percentage points, to -11%. This reflects the previouslyannounced -14% number from July and -11% figure from August. Implicitly, our updated full-Q4E projection presumes about a -8% to -9% estimate for September. FYI, according to Consensus Metrix, sell-side consensus for full-fiscal Q4E is at -11.8% (although keep in mind that Starbucks does not report out its same-store sales past the decimal point).

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12:00 AM

SBUX Introducing Some EPS Estimates

With this report, we introduce our quarterly EPS estimates for Starbucks’ (SBUX; Buy, $78.95) fiscal 2021E. Also, our full-fiscal 2021E EPS estimate also goes up by +5 cents, to $2.55, reflecting the 53rd fiscal week in fiscal 2021E. Starbucks’ fiscal year ends on the Sunday closest to September 30th. In 2020 this means September 27th; in 2021 this means October 3rd.

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12:00 AM

SBUX (Post-Call) June and July Sales Trends Better than Expected

After today’s market close, Starbucks (SBUX; Buy, $74.64) reported fiscal Q3 (calendar Q2) adjusted EPS of -$0.46 — better than our -$0.63 forecast and sell-side consensus (according to Consensus Metrix) of -$0.62. In its June 10th business update, Starbucks indicated it was then targeting fiscal Q3 adjusted EPS of -$0.55 to -$0.70. Fiscal Q3 EPS coming in better than the high end of the target range relates to better-than-expected June same-store sales (for example, June U.S. same-store sales down by -19%).

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12:00 AM

SBUX Adjusting Estimates Following Business Update

Earlier today, Starbucks (SBUX; Buy, $82.37) provided a business update as part of an 8-K filing. Given the information in that 8-K, we lower our fiscal Q3E (calendar Q2E) EPS estimate by -53 cents to -$0.63, and we reduce our fiscal Q4E (calendar Q3E) EPS forecast by -12 cents to $0.27. These updates lower our full-fiscal 2020E EPS projection by -65 cents, to $0.75. In addition, given this lower anticipated base of earnings coming off of fiscal 2020E, we take down our fiscal 2021E EPS estimate by -50 cents to $2.25.

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12:00 AM

SBUX (Post-Call) The Road to Recovery Begins with Resilience

After today’s (Tuesday’s) market close, Starbucks reported fiscal Q2 (calendar Q1) adjusted EPS of $0.32, matching the $0.32 figure that the company pre-announced on April 8th. We were at $0.32 entering today, with sell-side consensus (according to Consensus Metrix) at $0.31.

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12:00 AM

SBUX Updating Our Fiscal Q3E Same-Store and EPS Estimates

With this report, we lower our full-fiscal 2020E EPS estimate for Starbucks (SBUX; Buy, $71.57) by -4 cents, to $1.91. (Our full-fiscal 2021E EPS estimate remains at $2.90.) The four-cent reduction in our fiscal 2020E EPS forecast reflects (1) Starbucks estimating that its adjusted EPS for fiscal Q2 (January-March) will be about $0.32 — we move up our fiscal Q2E projection by +1 cent to $0.32, and (2) lowering our fiscal Q3E EPS estimate by -5 cents, to $0.15.

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12:00 AM

SBUX Updating Our Same-Store Sales and EPS Estimates for FY2020E & FY2021E

We lower our U.S. (and Americas, of which the U.S. makes up the vast majority) samestore sales estimates for Starbucks (SBUX; Buy) as follows:
Fiscal Q1A 2020: already reported at +6%
Fiscal Q2E 2020: down by -10 percentage points to -5%
Fiscal Q3E 2020: down by -32 percentage points to -30%
Fiscal Q4E 2020: down by -12 percentage points to -10%
Fiscal full-year 2020E: down by -14 percentage points to -10%
Fiscal full-year 2021E: up by +7 percentage points to +10%

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12:00 AM

SBUX Lowering Estimates as China SameStore Sales Down by -78% in February

Earlier today, Starbucks (SBUX; Buy, $76.19) filed an 8-K which quantified some of the potential impacts on its business from coronavirus in China (a company-owned market for Starbucks). As a result, we lower our full-fiscal 2020E EPS estimate by -23 cents, to $2.80. And, given this lower base of anticipated earnings coming off of 2020, partially offset by 2021 potentially lapping some easy comparisons, we take down our full fiscal 2021E EPS forecast by -17 cents, to $3.25. We note the following:

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12:00 AM

SBUX (Post-Call) Fiscal Q1 Healthy, But Coronavirus Afflicting Fiscal Q2

After today’s (Tuesday’s) market close, Starbucks (SBUX; Buy) reported fiscal Q1 2020 (= calendar Q4 2019) adjusted EPS of $0.79, surpassing our $0.75 forecast and sell-side consensus (according to Consensus Metrix) of 0.76. U.S. same-store sales growth of +6% exceeded our +5% projection and sell-side consensus of +5%. Worldwide same-store sales advanced by +5%, matching our estimate and consensus.

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12:00 AM

SBUX (Post-Call) S’More Traffic Gains Than Expected…Refreshing

After Thursday’s market close, Starbucks (SBUX; Buy) reported adjusted fiscal Q3 EPS of $0.78, surpassing our $0.73 forecast and sell-side consensus (according to Consensus Metrix) of $0.72. We attribute the earnings outperformance largely to better-than-expected same-store sales gains in the U.S. and in international markets.

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12:00 AM

SBUX Updating Our Rating on Starbucks Ahead of 7.25 Earnings Release

Ahead of Starbucks’ (SBUX) fiscal Q3 earnings release scheduled for after the market close on Thursday, July 25th, we upgrade SBUX to Buy (from Neutral). Some of the concerns we had 3-6 months ago have been alleviated to a meaningful degree, including (1) the possibility that a serious run for office by former CEO Howard Schultz could have an adverse effect on the business; Mr. Schultz has put his campaign on hold which significantly alleviates this risk, and (2) concerns about competition in China — public filings by Luckin Coffee (LK; Not Rated) — which had its IPO this past May — give us a greater comfort level that near-term competitive threats in this key growth market can be fought off.

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12:00 AM

SBUX We’ll Hoist a Venti S’mores Frappuccino to This Improved Outlook

After Thursday’s market close, Starbucks (SBUX; Neutral) reported adjusted fiscal Q2 EPS of $0.60, surpassing our $0.57 forecast and the sell-side consensus (according to Consensus Metrix) of $0.56. The company also raises its target range for full-fiscal 2019 EPS to $2.75-$2.79 (from $2.68-$2.73 previously, an increase of $0.07 at the low end of the range and an increase of $0.06 at the high end of the range). Management attributes the improved outlook as follows: (1) two-thirds to an improved tax-rate outlook, and (2) one-third to a better outlook for Americas’ operating margins.

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12:00 AM

Luckin Coffee A Look at Unit Economics

Earlier today, Luckin Coffee filed for an IPO, seeking to trade on the Nasdaq with the ticker symbol “LK.” Given the data provided in the filing with the SEC, we take a closer look at Luckin Coffee’s unit economics in this report. Incidentally, that SEC filing is available at:
https://www.sec.gov/Archives/edgar/data/1767582/000104746919002450/ a2238391zf-1.htm

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12:00 AM

SBUX Details of the Upcoming Starbucks Rewards Loyalty Program Changes

On its January 24th conference call, Starbucks (SBUX; Neutral) management commented that “Starbucks Rewards continues to be a powerful enabler of loyalty and we are thoughtfully evolving the program to provide greater choice and flexibility for Rewards members. We will enhance the program this spring to enable loyalty customers to earn and redeem more quickly and redeem those awards across a broader range of items in our stores.” In this report, we report on what we hear will be the changes to the loyalty program (timing likely to be April or May).

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12:00 AM

SBUX (Post-Call) Fiscal Q1 U.S. Same-Store Sales +$% an Encouraging Sign

After today’s market close, Starbucks (SBUX; Neutral) reported adjusted fiscal Q1 2019 (calendar Q4 2018) EPS of $0.75, exceeding our $0.66 forecast and sell-side consensus (as measured by Consensus Metrix) of $0.65. Starbucks notes that this $0.75 figure “included a $0.07 benefit from discrete income tax items,” suggesting the EPS beat excluding these tax items was $0.02 versus our forecast and $0.03 versus consensus.

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12:00 AM

SBUX Updating Our Fiscal Q1E Forecasts Ahead of 1.24 Earnings Release

Ahead of Starbucks’ (SBUX; Neutral) planned fiscal Q1 2019 (calendar Q4 2018) earnings release planned for after the market close this Thursday (January 24th), we raise our fiscal Q1 same-store sales forecast for the Americas (and the U.S.) by one percentage point, to +4%, placing us above sell-side consensus (as measured by Consensus Metrix) of +3%. The raised forecast has the effect of increasing our Q1E EPS projection by one cent, to $0.66, also placing us one cent above sell-side consensus of $0.65. Our full-fiscal 2019E EPS forecast goes up by $0.01, to $2.66. Given this slightly higher anticipated base of earnings coming off of fiscal 2019, our fiscal 2020E EPS estimate rises by $0.01, to $3.01. We reiterate our Neutral rating on SBUX.

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12:00 AM

SBUX Analyst Day Highlights Growth at Scale

Earlier today, Starbucks (SBUX; Neutral) hosted its every-two-years Analyst Meeting, this time around in New York City. In our view, the strategic path that Starbucks laid out — under the “Growth at Scale” theme — looks reasonable to us. Also, on the positive side, the transition from Starbucks being “founder-led” to “founder-inspired” — always a tricky thing to navigate for pretty much any company of size — seems to have gone relatively well, all things considered (meaning, look at examples of companies that didn’t get that transition right). On the risk side of the equation, some of the most challenging risks are to a meaningful degree outside of Starbucks’ control, with Dunkin’ (owned by Dunkin’ Brands Group [DNKN; Neutral] recently launching its revamped espresso platform nationwide in the U.S.), and privately-held Luckin Coffee — which ended 2017 with zero stores in China — now at 1,700+ units in that key market (and growing rapidly). That said, Starbucks understands that its brand is different from others in the coffee marketplace, including (but not limited to) Dunkin’ and Luckin Coffee, and will seek to further differentiate the Starbucks brand going forward. We tweak our fiscal 2019E and fiscal 2020E EPS estimates downward by $0.01 each, to $2.65 and $3.00, respectively. We reiterate our Neutral rating on SBUX, and note the following:

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12:00 AM
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