During the earnings season of the U.S. stock market, there will be "thunderstorms" from time to time! Now it is the turn of the well-known and big-name Starbucks.
On May 1, local time, Starbucks' stock price crashed, once falling nearly 18%! As of the close, Starbucks fell 15.88%, its stock price closed at $74.44, with a total market value of $84.318 billion, and its market value evaporated by $15.915 billion (about 115 billion yuan) overnight.
The sharp drop in Starbucks' stock price is related to its latest financial report. In the first quarter (January 1 to March 31, 2024), Starbucks' revenue and earnings per share data fell short of market expectations. In particular, same-store sales fell 4% year-on-year, the first decline since 2020, compared with the previous consensus of a 1.46% increase. Separately, Starbucks lowered its full-year revenue growth forecast to the low single digits and hinted at a likely flat EPS after adjustment. Some analysts said that Starbucks reported results in the quarter may be the worst of all large companies so far.
Subsequently, JPMorgan Chase lowered its Starbucks price target to $92 from $100, Deutsche Bank downgraded Starbucks to Hold, and investment bank William Blair also downgraded Starbucks' stock recommendation rating.
Revenue, earnings, etc. fell short of expectations
On the morning of May 1, Beijing time, Starbucks disclosed its second-quarter results. According to the data, Starbucks' operating income for the quarter was $8.56 billion, down 2% year-on-year, less than the consensus of $9.13 billion, net profit was $772 million, down 14.96% year-on-year, and adjusted earnings per share were $0.68, less than the market expectation of $0.79.
Starbucks' same-store sales figures were significantly lower than market expectations. Specifically, the company's same-store sales fell 4% year-on-year in the quarter, the first decline since 2020, and the consensus was expected to rise by 1.46%. Among them, U.S. store sales fell by 3% year-on-year, with the market expectation of an increase of 2.31%, and store sales in China decreased by 11% year-on-year, with the market expectation of a decrease of 1.64%.
While the average amount spent at Starbucks increased by 2% in the quarter, foot traffic at coffee shops decreased by 6%. In an effort to boost sales, Starbucks has tried a series of new strategies, including afternoon sales and the launch of new products such as lavender lattes, but the results have not significantly improved performance.
In light of these challenges, Starbucks has revised its growth forecast for 2024 for the third time. The company now expects global revenue growth to be in the low single digits, well below its previous forecast range of 7% to 10%. Meanwhile, global and U.S. same-store sales are expected to decline in the low single-digit digits or be flat. In addition, it lowered its expectations for same-store sales in China and global store growth.
The company's chief executive, Laxman Narasimhan, described the current situation as "a challenging environment" and highlighted macroeconomic headwinds and consumer pressures as key challenges. Since Laxman Narasimhan took office more than a year ago, the company has lowered its guidance several times, and the earnings data further underscores the stark reality that Starbucks is facing a steady consumer retreat.
△ In the Starbucks intangible cultural heritage concept store, many customers are drinking coffee and chatting and resting. (PHOTO COURTESY OF CNSPHOTO)
Wall Street downgraded Starbucks' ratings and ratings
After the disclosure of the above-mentioned earnings data, Starbucks' stock price fell sharply, and the company's stock price fell 13.74% before the U.S. stock market on Wednesday, and the lowest fell to $76.33 per share. After the U.S. stock market opened, Starbucks shares continued to decline, and as of press time, the company's stock price fell 15.88%, with a market capitalization of $84.28 billion, and the stock price was $74.4 per share.
After Starbucks announced its results, Wall Street analysts downgraded its ratings and evaluations.
Adam Crisafulli, an analyst at Vital Knowledge, said in a note that Starbucks reported results for the quarter that were probably the worst of any large company to date.
Deutsche Bank analyst Lauren Silberman downgraded Starbucks to Hold, with a Buy rating and a price target of $89. Sharon Zackfia, an analyst at investment bank William Blair, also downgraded Starbucks' stock recommendation rating from "outperform" to "in line with the broader market," citing the coffee chain's shocking across-the-board lapse across all key metrics.
In addition, JPMorgan Chase lowered Starbucks to $92 from $100 and Deutsche Bank downgraded Starbucks to hold with a price target of $89.
Andy Barish, an equity analyst at Jefferies, commented on Starbucks' latest earnings report, saying that it was a glaring mistake and that there is no easy solution in sight. "The question for the company and investors is whether these challenges are temporary issues about branding, relevance and competitiveness, or longer-term issues, especially in China. ”
In March this year, Howard Schultz, founder and honorary chairman of the board of directors of Starbucks, visited China. At the event, he talked about his views on the Chinese market and the fierce competition. Schultz says competition is introducing millions of people to coffee. But the company is not engaged in a discount war or price war, what Starbucks wants to do is to create a humanistic connection with high-quality coffee based on the community and form an "experiential coffee brand". Schultz also said that over time, as customers learn more about coffee, they will want to upgrade from lower-end or discounted products. "As long as we continue to earn the respect of the market, they will choose to upgrade to Starbucks," said Howard Schultz. I am very confident that Starbucks will continue to be a market leader over time. ”
The wind of 9 pieces of 9 swept to Starbucks?
Howard Schultz's statement that "there is no interest in a price war" has not yet fallen, and "the wind of 9 pieces of 9 has finally swept up to Starbucks" has been on the hot search.
On social platforms, "half-price Starbucks wool" and "3 yuan Starbucks drink" and other "ultimate money-saving version" strategies have become hot topics of discussion among netizens. In the perception of many consumers, it is not difficult to buy low-cost Starbucks coffee nowadays.
"15 yuan off for 70 yuan", "55.9 yuan for three cups", "45.9 yuan for two cups"...... In the Starbucks card bag of Xiaoqi (pseudonym), who was born in the 90s, there are many coupons "lying", so that the unit price of coffee that is more than 30 yuan is as low as 20 yuan. "These offers have been pushed for a long time. Xiaoqi said that the "group coffee" campaign was launched in 2023, and the coupon campaign has existed since at least 2023.
In this regard, Wang Jingying, chairman and CEO of Starbucks China, explained that the main reason for the decrease in the unit value of customers is the personalized preferential promotions launched by Starbucks China to increase the frequency of consumers' purchases. "This allows us to optimize sales and profits. This means that "price for volume" has gradually become a reality for Starbucks in the Chinese market.
At the same time, Luckin Coffee, a well-known domestic coffee brand, also announced its first-quarter financial report a few days ago. In the first quarter, the total net income of Luckin Coffee was 6,278.1 million yuan, a year-on-year increase of 41.5%, and the number of stores in the first quarter increased by 2,342, bringing the total number of stores to 18,590, including 12,199 self-operated stores and 6,391 affiliated stores.
From the perspective of store operation, the revenue of Luckin Coffee's self-operated stores in the first quarter was 4.58 billion yuan, a year-on-year increase of 45.8%. The profit at the self-operated store level in the first quarter was 321 million yuan, and the profit margin at the self-operated store level was 7.0%, while the revenue of the associated stores in the first quarter was 1.508 billion yuan, a year-on-year increase of 32.8%.
Driven by the accelerated layout of stores and continuous product innovation, the number of new trading customers of Luckin reached 22.92 million in the first quarter, and the average number of monthly trading customers exceeded 59.91 million, a year-on-year increase of 103.2%.
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