Starbucks Stock Price Collapses

By Douglas A. McIntyre Updated Jun 24, 7:02AM EDT · Published Jun 22, 7:06AM EDT

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Starbucks Stock Price Collapses — © Mall Starbucks (CC BY-SA 4.0) by Mr.u3061u3085u3089u3055u3093

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Starbucks used to be a growth company, but its stock is down.
Earnings are part of the reason, but the real challenge is inflation.

Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) was once the bright shining light of fast-food companies. It charged large premiums for coffee and even larger ones for special drinks. The food was priced to drive strong margins. The stock rose from $85 five years ago to $125 in July 2021. After that five-year trip, it is back to $80.

Eventually, the consumer got tired of the high prices. On the most recent earnings call, CEO Laxman Narasimhan said, “In this environment, many customers have been more exacting about where and how they choose to spend their money, particularly with stimulus savings mostly spent.” Inflation, which Americans feel is high (no matter what government numbers show), has made people feel pinched financially. (Starbucks has union problems as well.)

It is easy to say that Starbucks’ earnings are the primary reason the share price has crashed. It has been down 22% in the past year, while the S&P 500 has been up 25%. Revenue fell 2% in the most recent period to $8.6 billion. Per-share earnings fell 14% to $.68. Narasimhan said that Starbucks had plans to improve the numbers. In reality, there is nothing he can do about inflation and the belief by many Americans that their buying power is shrinking.

The carefully followed Survey of Consumer Sentiment from the University of Michigan shows Americans are worried about inflation, particularly compared to the pre-pandemic levels. The consumer price index shows the cost of living has dropped to about 3% from 8% two years ago. Starbucks’ challenge is that people don’t believe that.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.