We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why Investors Should Retain Starbucks (SBUX) Stock
Read MoreHide Full Article
Starbucks Corporation (SBUX - Free Report) is benefiting from robust North America and International sales accompanied by solid expansion initiatives. Also, the emphasis on product innovation bodes well.
The Zacks Rank #3 (Hold) company’s earnings and sales in fiscal 2024 are likely to witness growth of 10.1% and 17% year over year, respectively. However, high costs and economic risks are concerning. Earnings estimates for fiscal 2024 have declined in the past 30 days, depicting analysts’ concern regarding the stock’s growth potential.
Let us discuss the factors that highlight why investors should retain the stock for now.
Robust International & North America Comps Growth: The company’s North America comps impressed investors for the 11th straight quarter. During the fourth quarter of fiscal 2023, the segment benefited from growth in comparable store sales of 8%, net new company-operated store growth of 4% and strong licensed store sales. The segment's average ticket and comparable transaction increased 6% and 2%, respectively, on a year-over-year basis.
Internationally, the company reported net revenues of $1,979.9 million, up 11% year over year. An improvement of 5% in comparable store sales, net company-operated new store growth of 12% and momentum in its licensed store revenues resulted in this uptick. This was marginally offset by an unfavorable impact of nearly 3% from foreign currency translation.
Solid Expansion Efforts: The company aims to enhance global market share through strategic store openings, remodels, technology deployment, cost control, and robust product innovation and brand building. In the first, second, third and fourth quarters of fiscal 2023, Starbucks opened 459, 464, 588 and 816 net new stores worldwide, respectively. This resulted in 2,327 net new stores in fiscal 2023, bringing the total global store count to a record of 38,038 stores.
For fiscal 2024, the company expects store count in the United States and China to grow approximately 4% and 13%, respectively, on a year-over-year basis. Management projects global store growth to be approximately 7%. Capital expenditures in fiscal 2024 are estimated to be approximately $3 billion.
Focus on Innovation: SBUX enhances its product portfolio with innovations in beverages, refreshments, health, wellness, tea and core food offerings. Aiming for healthier choices, Starbucks partnered with Beyond Meat for a plant-based lunch menu in China, featuring the latter's products in pastas and lasagna. The Starbucks Oleato beverage range, launched in February 2023 in Italy, Japan and the United States, garnered success, prompting plans for further expansion into additional markets.
Image Source: Zacks Investment Research
Concerns
Shares of SBUX have declined 5.3% in the past year against the Zacks Retail – Restaurants industry’s 2.4% rise. The ongoing inflationary pressure has been hurting the company’s performance. Its ingredients are witnessing a jump in price since the last few quarters. Higher expenses may weigh on margins in the near term. During fiscal 2023, the company’s total operating expenses climbed 9.4% year over year.
Being a retail restaurant, Starbucks is dependent on a consumer discretionary spending environment. Consumers’ propensity to spend largely depends upon the overall macroeconomic scenario. The company, therefore, is highly vulnerable to the inconsistent nature of consumer discretionary spending.
Key Picks
Some better-ranked stocks from the Zacks Retail-Wholesale sector are:
Brinker International, Inc. (EAT - Free Report) currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 223.6%, on average. The stock has gained 12.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and earnings per share (EPS) suggests a rise of 5.1% and 26.2%, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. (ANF - Free Report) flaunts a Zacks Rank #1 at present. It has a trailing four-quarter earnings surprise of 713%, on average. Shares of ANF have surged 230.4% in the past year.
The Zacks Consensus Estimate for ANF’s 2023 sales and EPS suggests increases of 13.3% and 2,196%, respectively, from the year-ago period’s levels.
Beacon Roofing Supply, Inc. (BECN - Free Report) carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 11.1%, on average. Shares of BECN have risen 37.6% in the past year.
The Zacks Consensus Estimate for BECN’s 2023 sales and EPS indicates 7.2% and 8.2% growth, respectively, from the year-ago period’s levels.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Here's Why Investors Should Retain Starbucks (SBUX) Stock
Starbucks Corporation (SBUX - Free Report) is benefiting from robust North America and International sales accompanied by solid expansion initiatives. Also, the emphasis on product innovation bodes well.
The Zacks Rank #3 (Hold) company’s earnings and sales in fiscal 2024 are likely to witness growth of 10.1% and 17% year over year, respectively. However, high costs and economic risks are concerning. Earnings estimates for fiscal 2024 have declined in the past 30 days, depicting analysts’ concern regarding the stock’s growth potential.
Let us discuss the factors that highlight why investors should retain the stock for now.
Robust International & North America Comps Growth: The company’s North America comps impressed investors for the 11th straight quarter. During the fourth quarter of fiscal 2023, the segment benefited from growth in comparable store sales of 8%, net new company-operated store growth of 4% and strong licensed store sales. The segment's average ticket and comparable transaction increased 6% and 2%, respectively, on a year-over-year basis.
Internationally, the company reported net revenues of $1,979.9 million, up 11% year over year. An improvement of 5% in comparable store sales, net company-operated new store growth of 12% and momentum in its licensed store revenues resulted in this uptick. This was marginally offset by an unfavorable impact of nearly 3% from foreign currency translation.
Solid Expansion Efforts: The company aims to enhance global market share through strategic store openings, remodels, technology deployment, cost control, and robust product innovation and brand building. In the first, second, third and fourth quarters of fiscal 2023, Starbucks opened 459, 464, 588 and 816 net new stores worldwide, respectively. This resulted in 2,327 net new stores in fiscal 2023, bringing the total global store count to a record of 38,038 stores.
For fiscal 2024, the company expects store count in the United States and China to grow approximately 4% and 13%, respectively, on a year-over-year basis. Management projects global store growth to be approximately 7%. Capital expenditures in fiscal 2024 are estimated to be approximately $3 billion.
Focus on Innovation: SBUX enhances its product portfolio with innovations in beverages, refreshments, health, wellness, tea and core food offerings. Aiming for healthier choices, Starbucks partnered with Beyond Meat for a plant-based lunch menu in China, featuring the latter's products in pastas and lasagna. The Starbucks Oleato beverage range, launched in February 2023 in Italy, Japan and the United States, garnered success, prompting plans for further expansion into additional markets.
Image Source: Zacks Investment Research
Concerns
Shares of SBUX have declined 5.3% in the past year against the Zacks Retail – Restaurants industry’s 2.4% rise. The ongoing inflationary pressure has been hurting the company’s performance. Its ingredients are witnessing a jump in price since the last few quarters. Higher expenses may weigh on margins in the near term. During fiscal 2023, the company’s total operating expenses climbed 9.4% year over year.
Being a retail restaurant, Starbucks is dependent on a consumer discretionary spending environment. Consumers’ propensity to spend largely depends upon the overall macroeconomic scenario. The company, therefore, is highly vulnerable to the inconsistent nature of consumer discretionary spending.
Key Picks
Some better-ranked stocks from the Zacks Retail-Wholesale sector are:
Brinker International, Inc. (EAT - Free Report) currently sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 223.6%, on average. The stock has gained 12.4% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EAT’s 2024 sales and earnings per share (EPS) suggests a rise of 5.1% and 26.2%, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. (ANF - Free Report) flaunts a Zacks Rank #1 at present. It has a trailing four-quarter earnings surprise of 713%, on average. Shares of ANF have surged 230.4% in the past year.
The Zacks Consensus Estimate for ANF’s 2023 sales and EPS suggests increases of 13.3% and 2,196%, respectively, from the year-ago period’s levels.
Beacon Roofing Supply, Inc. (BECN - Free Report) carries a Zacks Rank #2 (Buy). It has a trailing four-quarter earnings surprise of 11.1%, on average. Shares of BECN have risen 37.6% in the past year.
The Zacks Consensus Estimate for BECN’s 2023 sales and EPS indicates 7.2% and 8.2% growth, respectively, from the year-ago period’s levels.