Starbucks is bracing for record losses in its stock prices as concerns mount over its recent sales performance.
The renowned coffee chain has experienced a slump, with its stock suffering a record run of losses, resulting in a market value decline of nearly $12 billion, equivalent to a 10% decrease, Bloomberg reported Monday (Dec. 4).
This decline represents the longest losing streak for Starbucks since it went public in 1992. Analysts are attributing this slump to a “material slowing” in sales trends, as indicated by third-party sales data for November. This slowdown comes after the company achieved strong comparable sales growth of 8% in the fiscal fourth quarter.
JPMorgan Chase analyst John Ivankoe has lowered his first-quarter estimate for U.S. comparable sales growth from 6% to 4% compared to the previous year, noting that Starbucks’ Christmas promotional campaign may not match the success of its fall Pumpkin Spice Latte event, per the report.
Starbucks’ shares initially rallied in November following better-than-expected quarterly results and a positive sales outlook for fiscal 2024. However, concerns about slow sales trends and “still-slow China data” have caused the stock to decline. Credit card data has also indicated a slowdown in U.S. comparable sales over the past few weeks, further fueling investor nervousness, Bloomberg reported.
The overall snack and coffee industry has experienced a deceleration in sales trends, with Starbucks playing a significant role in this slowdown, the report said. Data-driven research firm M Science reported that sales trends in the industry have been softening on a week-over-week basis, largely influenced by Starbucks’ performance. The recent labor strikes and boycotts, including the Red Cup Day protests on Nov. 16, have also impacted as many as 200 Starbucks locations in the U.S., further hampering sales.
Investors are increasingly worried that Starbucks may not meet consensus expectations for U.S. comparable sales in the current quarter, with Wedbush Securities analyst Nick Setyan telling Bloomberg that Starbucks is particularly sensitive to signs of consumer weakness.
As of now, Starbucks’ stock is down 1.9% for the year, in contrast to an 11% gain for the S&P 1500 Composite Restaurants Index. To reverse its declining stock prices, Starbucks will need to address these sales concerns and regain investor confidence.
The coffee chain may struggle to do so as consumers say they plan on cutting back spending during the holiday season.
“The Credit Economy: How Consumers Are Approaching Holiday Spending and Travel,” a recent report by PYMNTS Intelligence and i2c, found that 79% of consumers plan to cut back on buying food from restaurants this holiday season, amid tighter financial constraints and ongoing inflation.
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