Starbucks Corporation
Yesterday, the company reported fourth-quarter revenues of $9.07 billion versus estimates of $9.38 billion. Comparable store sales declined 7% globally, driven by an 8% decline in comparable transactions, partially offset by a 2% increase in average ticket.
Wedbush analyst Nick Setyan reiterated the Neutral rating on the stock, lowering the price forecast to $95 from $98.
According to the analyst, the firm's current valuation reflects limited visibility for near-term revenue and earnings. However, there is confidence in management's potential for long-term annual operating margin expansion and EPS growth aligned with historical rates.
According to the analyst, CEO Niccol identified a key issue for SBUX: improving customer wait times to under four minutes across all ordering methods to enhance these speeds while also providing a great coffeehouse experience.
The analyst notes that the company will eliminate the upcharge for alternative dairy products, impacting comp and operating margins by about 1% in the U.S.
Additionally, promotional efforts will shift from offers to marketing, with expected lower unit growth in FY25 and upcoming remodels to address current challenges.
The analyst's FY25 U.S. SSS growth estimate is 0.0%, and the International SSS growth estimate is (4.8%).
Setyan lowered the FY25 EPS estimate to $2.88 from $3.35. The analyst did not introduce FY26 estimates, given the lack of visibility.
TD Cowen analyst Andrew M. Charles reiterated the Buy rating on the stock, with a price forecast of $110.
The analyst notes that achieving wait times of under 4 minutes will need customized solutions.
While no long-term guidance was provided, the analyst argues that the strategy should achieve durable North America same-store sales growth of over 5%, which is necessary to improve domestic margins.
The analyst highlights that the company is mapping out a food & beverage SKU rationalization.
Per Charles, the focus on simplification & thru-put delays the timeline for material menu innovation as Niccol enhances Starbucks' stage gate process. The analyst lowered the 2025 EPS estimate to $3.06 from $3.98.
Price Action: SBUX shares are trading higher by 0.32% to $97.63 at last check Thursday.
