Starbucks (SBUX) Analysis
Starbucks shares jumped more than 20% in August after news that the coffeemaker was replacing their CEO with Chipotle’s CEO, Brian Niccol. Niccol has been recognized for his accomplishments as a leader, one of which is helping Chipotle more than double their revenue throughout his time there.
Investors are hoping that Niccol can help turn things around for Starbucks, which has struggled to post any significant growth this year. Q1 of 2024 started off with a positive 8% growth, but the following two quarters reflected negative year over year growth. Rising competition, a more cautious consumer, and overall economic pressures have disrupted the company’s growth streak, not only leading to falling sales, but also weakened profitability.
Nonetheless, the coffee chain giant still posted its biggest year of revenue in 2023, with the number nearly hitting $36 billion. The number is expected to remain about the same again this year, which is okay for the company, but not great for its investors. A year of zero growth is not usually welcomed, especially during times of uncertainty, but it is something that Starbucks investors must accept considering the nature of the business. Price sensitive consumers are becoming more common as economic hardships grow, which means a $5 cup of coffee may be demoted from the daily necessities.
Despite excitement around their new leader, Starbucks still has a challenging year ahead. Navigating through the changing economic environment is going to take a series of right moves, so it will be interesting to see what Niccol has in mind to help kickstart growth.