Starbucks (SBUX) Reward For Cutting Prices: An S&P Downgrade

Starbucks (SBUX)  announced today that customers will be able to buy a coffee and breakfast item for $3.95.  Can Starbucks afford to do that with its relatively high costs of real estate, workers, and food? Only the management at the company can say for certain.

Perhaps it is a coincidence, but S&P cut Starbucks’ rating after the close. The agency revised its outlook on Starbucks to negative from stable. At the same time, it lowered the company’s short-term rating to ‘A-3’ from ‘A-2’ and removed it from CreditWatch with negative implications.

If the new $3.95 meal plan does not help, Starbucks is going to get cut again.

Douglas A. McIntyre