Starbucks Corp. is grappling with an unprecedented streak of losses, causing investor worry as the coffee giant experiences its longest decline in the public eye since 1992. Monday saw a 1.6% drop in stock, marking the 11th consecutive day of decline and erasing a staggering 9.4% of Starbucks’ market value, equating to nearly a $12 billion reduction.
The sales slowdown first became apparent in November, backed by third-party sales data, following a previously robust period of 8% sales growth in the fiscal fourth quarter. Insights from JPMorgan Chase & Co. analyst John Ivankoe, shared in a Monday note, shed light on these developments.
Given the recent trends, Ivankoe has revised his optimistic Q1 U.S. comparable sales growth forecast from 6% to a more cautious 4% compared to the same period last year. This adjustment reflects a less impressive Christmas holiday promotion compared to the successful Pumpkin Spice Latte event in the fall.
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Despite Starbucks’ shares initially surging in early November due to better-than-expected quarterly results and a positive sales outlook for fiscal 2024, the stock has spiraled downward in the past two weeks. Ivankoe emphasizes concerns about subdued China data and sales trends, maintaining an “overweight rating on the stock.”
Adding to the conversation, Wedbush Securities Inc. analyst Nick Setyan expresses investor apprehension about U.S. comparable sales falling below consensus expectations this quarter, fueled by recent credit card data suggesting a potential slowdown. Setyan holds a neutral stance on Starbucks, citing its sensitivity to signs of consumer weakness.
Data-driven research firm M Science has identified decelerated sales trends in the snack and coffee industry on a weekly basis, attributing it to Starbucks’ softer performance. Analyst Matthew Goodman notes that the cooling trends result from three consecutive weeks of reduced sales, influenced by recent boycotts and labor strikes, including the Red Cup Day strike impacting up to 200 U.S. locations.
Starbucks is currently facing boycotts as a result of a worldwide movement to distance from brands providing economic support to Israel. This movement gained traction due to Starbucks’ perceived position on the Israel-Palestine conflict. Tensions heightened when Starbucks initiated legal action against its employee union concerning a post expressing support for Palestine. The post, issued in response to the Israeli military operation in Gaza, was subsequently taken down, with the union asserting that it had not been authorized by its leaders.
