Shares of Starbucks Corp. (NASDAQ: SBUX) have declined 11 days in a row. According to Bloomberg, this has not happened since the coffee store chain’s IPO in 1992. The drop-off has knocked $12 billion off the market cap of Starbucks. Among the causes are estimates that its same-store sales have fallen recently.
To make matters worse, Starbucks stock has done much worse than its primary rival, McDonald’s Corp. (NYSE: MCD). Over the past two years, McDonald’s stock has been up 15%, Starbucks is down 12%, and the S&P 500 has been flat over the same period.
This was supposed to be a strong period for Starbucks and its new CEO, Laxman Narasimhan. Revenue for the most recently reported quarter was 11% higher to $9.4 billion. Net income rose 10% to $1.2 billion. Comparable store sales rose 8% worldwide.
The question that investors face is whether recent observations about same-store sales at Starbucks are correct. No one can say for certain, outside the company, whether sales growth is slowing. And, if it is slowing, no one outside Starbucks can explain why.
Starbucks’ strength with Wall Street is built on a nearly endless expansion, which may be problematic. Store count reached 20,228 at the end of the last quarter, up from 18,416 in the same period the year before. Starbucks may have overbuilt, particularly in the United States. And overbuilt chains eventually face challenges in same-store sales. (Customers are abandoning these 25 brands.)
Another large question is whether the unionization among Starbucks store workers will continue to expand. The current labor effort is limited to local areas. However, Starbucks has faced actions by the federal government about how it has countered the union efforts. In September, the National Labor Relations Board said that management violated labor laws more than once.
Unionization can be expensive. Typically, unions fight for better wages and benefits. That can eat into the bottom line at Starbucks.
When the company announces the results of its current quarter, Starbucks stock investors will find out whether observations about slow same-store sales are correct. In the meantime, those investors face the challenge of a falling share price.
Credit Card Companies Are Doing Something Nuts
Credit card companies are at war. The biggest issuers are handing out free rewards and benefits to win the best customers.
It’s possible to find cards paying unlimited 1.5%, 2%, and even more today. That’s free money for qualified borrowers, and the type of thing that would be crazy to pass up. Those rewards can add up to thousands of dollars every year in free money, and include other benefits as well.
We’ve assembled some of the best credit cards for users today. Don’t miss these offers because they won’t be this good forever.
Flywheel Publishing has partnered with CardRatings for our coverage of credit card products. Flywheel Publishing and CardRatings may receive a commission from card issuers.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
