Starbucks Has a Share Price Problem

As Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) battles to keep unions out of its stores, it faces another hurdle. Its stock price is in trouble.

Starbucks has battled the unions for over a year. Howard  Schultz, who took the company from very small to huge, based on store count and revenue, returned recently. He and the board thought he was a better solution than his predecessor to repair growth trouble. Problems multiplied, certainly with workers, rather than getting better. (Customers are abandoning these 25 brands.)
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Schultz was hauled before Congress for what some politicians considered a litany of sins. He had undermined the organizing of unions, fired one major union organizer (for being late to work several times–maybe) and Starbucks has been officially branded as a union buster by the National Labor Relations Board.
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The share price of Starbucks is up 4% this year, against a 16% increase in the Nasdaq. Why? Earnings have been reasonable. Revenue rose 8% to $8.7 billion in the most recently reported quarter. Net income rose 4% to $855 million. Investors may be worried about a slowing economy. Of course, they may be worrying about the rising costs of ingredients Starbucks uses in its food and beverages and whether those can be passed along to customers.
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The reasons for the share price problem are muddy. However, investors can never turn away from the fact that, at food retailers that pay modest hourly wages, a union’s success will squeeze margins. This potentially extends to companies like Walmart and McDonald’s. But those two do not have that problem today.
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The more unionized workers Starbucks has, the more pressure that will be put on the stock. There is always a chance that battles with labor lead to boycotts.

The share price problem at Starbucks is not out of the woods.