Starbucks CEO Turnaround Shows Early Signs of Success
Written by Emily J. Thompson, Senior Investment Analyst
Source: CNBC
- Sales Recovery: After six consecutive quarters of decline, North American same-store sales were flat in Q3, indicating early success of CEO Brian Niccol's turnaround strategy, with a projected 2% increase in Q4 same-store sales likely to boost investor confidence.
- Profitability Potential: Niccol's initiatives could elevate operating margins from 9% to a mid-teens level, with Deutsche Bank forecasting margins could reach 17%, suggesting future earnings per share could hit $3.50 to $4, enhancing market valuation expectations for Starbucks.
- Service Efficiency Improvement: The 'Green Apron Service' has reduced service times to under four minutes in 80% of U.S. stores, which not only enhances customer satisfaction but also has the potential to drive sales growth and solidify market position.
- Cautious Market Sentiment: Despite analysts' cautious outlook, with less than half of Wall Street viewing Starbucks as a buy, this presents a good entry point for investors, as market sentiment may improve as the turnaround progresses.
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Analyst Views on SBUX
Wall Street analysts forecast SBUX stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for SBUX is 96.12 USD with a low forecast of 59.00 USD and a high forecast of 115.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
21 Analyst Rating
12 Buy
7 Hold
2 Sell
Moderate Buy
Current: 95.160
Low
59.00
Averages
96.12
High
115.00
Current: 95.160
Low
59.00
Averages
96.12
High
115.00
About SBUX
Starbucks Corporations is a roaster, marketer, and retailer of specialty coffee globally. Its North America segment includes the United States and Canada. Its International segment includes China, Japan, Asia Pacific, Europe, Middle East and Africa, Latin America, and the Caribbean. Its North America and International segments include both Company-operated and licensed stores. The Channel Development segment includes roasted whole bean and ground coffees, Starbucks-branded single-serve products, a variety of ready-to-drink beverages, such as Frappuccino and Starbucks Doubleshot, foodservice products, and other branded products sold outside the Company-operated and licensed stores. A large portion of its Channel Development business operates under a licensed model of the Global Coffee Alliance with Nestle, while its global ready-to-drink businesses operate under collaborative relationships with PepsiCo, Inc., Tingyi-Ashi Beverages Holding Co., Ltd., Arla Foods amba, Nestle, and others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Starbucks Reports Mixed Q1 Results Amid Turnaround Strategy
- Performance Recovery: Starbucks reported a net income of $293.3 million and earnings per share of $0.26 for Q1, down from $780.8 million and $0.69 a year earlier, indicating pressure from turnaround costs and rising coffee prices on profitability.
- Sales Growth: The company achieved a 6% increase in net sales to $9.92 billion, with global same-store sales rising 4%, surpassing market expectations of 2.3%, marking the first transaction growth in two years and indicating a trend of customer return.
- China Market Strategy: Starbucks announced a joint venture with Boyu Capital to operate its business in China, expected to close in Q2 of fiscal 2026, further solidifying its position in the world's second-largest market.
- Expansion Plans: Starbucks aims to open 600 to 650 new stores in fiscal 2026, despite closing approximately 400 U.S. locations last year, demonstrating the company's commitment to global market expansion.
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Starbucks Reports Earnings Below Expectations, Yet Stock Price Increases.
- Quarterly Sales Performance: Starbucks reported quarterly sales that exceeded expectations.
- Earnings Report: Despite strong sales, the company's earnings fell short of projections due to ongoing investments aimed at a turnaround strategy.
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