Is It Time to Dump Your Starbucks or Fill up Your Cup?

By Andrew Stotz | May 7, 2024

What the heck happened to Starbucks?

Began as a coffee bean company and evolved into a global coffee icon

The American multinational company was founded by Jerry Baldwin, Zev Siegl, and Gordon Bowker in 1971
Then Howard Schultz Joined Starbucks in 1982 and transformed it into a global brand
Credited with popularizing the concept of the “third place” – a comfortable social gathering spot outside of home and work
Stepped down as CEO in 2000 but returned in 2008 to guide Starbucks through the global financial crisis, finally stepped down in 2022

The number of company-operated and licensed stores is roughly the same

Worldwide store distribution in 2023, with a main focus on the US, followed by China

The beverage segment is the revenue champion

Quarterly results

Reported FY2Q24 recurring EPS of US$0.69, which was -14.3% YoY and -24.3% QoQ
The 6M24 result was 53.2% of our full-year EPS forecast

Download the full report as a PDF

Starbucks had its worst day in trading since June 2022

Starbucks share dropped nearly 16% on 1st May 2024
Its CEO and CFO claimed the decline in revenue was due to occasional customers’ weak spending, conflict in the Middle East, and a higher promotional environment in China

Starbucks continues to feel effects of Gaza war boycotts

Starbucks lowered its full-year expected profits after a marked drop-off in customer traffic
The ongoing boycott for its perceived support of Israel is one of the reasons for that
2,000 jobs had been cut in some of the Middle East franchises

Starbucks – US – Founded 1971

Cons. Disc. sector, 381,000 employees, US$36bn revenue

Main segments/products

Starbucks Coffee beverages
Frappuccino blended beverages
Starbucks Reserve Roastery and Reserve stores

Its competitive advantage

Competitive advantage through strong brand loyalty, premium coffee experience, and global expansion.

How it achieved its competitive advantage

Achieved by creating a unique coffeehouse atmosphere, focusing on high-quality beans, providing personalized customer experiences, and building a strong global presence through franchising and company-owned stores.

Is the company financially world class?

I use my World Class Benchmarking scorecard to measure if a company has a competitive advantage

I developed this scorecard ten years ago; here’s how we construct it

My team gathers the yearly and quarterly financial data of 26,000 companies worldwide
We then calculate each company’s Profitable Growth score
- Which is a composite measure of both profitability and growth

Download the full report as a PDF

Free cash flow

Discounted cash flow analysis

I use my FVMR methodology to determine the attractiveness of the company

Download the full report as a PDF

DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.

0 Shares