What A Longtime Starbucks Shareholder is Most Worried About Right Now

Starbucks’ financial results for the fiscal second quarter of 2024 were disappointing, leading to a 3% drop in same-store sales in Q2. The company’s CEO, Laxman Narasimhan, identified the problem as not communicating the value it provides to occasional customers. To address this, Starbucks began rolling out deals for 33 million mobile app users, hoping to win business from occasional customers by providing bargains. However, this move could be the wrong and potentially costly one for Starbucks, as it could lead to a 6% year-over-year drop in operating profit in North America.

The company’s Q2 operating profit was $1.1 billion, which is good, but it was down 6% year over year, despite higher prices charged. Lower prices could stimulate sales at its locations, but without a significant boost from running promotions, profits could continue to drop. Former longtime CEO Howard Schultz also highlighted the company’s fall from grace, stating that US operations were the primary reason for the company’s fall from grace. Schultz’s analysis suggests that Starbucks’ order completion rate took a hit due to app users being frustrated with wait times and product availability.

Staffordable investors may find this plan to be the wrong move, as the stock is trading at a once-in-a-decade valuation, which is attractive for value investors. However, it is crucial for Starbucks to accurately assess and fix the operational problems, as long wait times and lack of product availability speak to an operational problem. If addressed with intention and energy, these issues could be resolved in under a year. However, since Starbucks is focused on driving traffic through limited-time bargains, it may take some time to realize it’s on the wrong path and fix the real issues, leading to a delayed operational recovery.

Despite Starbucks’ strong brand and ability to withstand periods of waning consumer enthusiasm, shareholders should be patient and patient with their holdings.

Read More @ Yahoo

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