Starbucks
stock rose Wednesday, putting it on pace to break a record 12-day losing streak driven by concerns about a holiday season sales slump.
Starbucks
shares were up 1.6% Wednesday to $97.05. Before Wednesday’s gain, the stock fell for 12 consecutive trading days, resulting in an 11% decline and the loss of $14.2 billion in market capitalization over that period, according to Dow Jones Market Data.
Investors have feared a sales decline could be coming. In a research note Monday, JPMorgan analyst John Ivankoe said that third-party sales data showed a “material slowing in November.”
Ivankoe also lowered his December quarter comparable sales outlook “to reflect what may be a less successful Christmas Holiday promotion than the success of the re-launch of Pumpkin Spice Latte.” He rates the stock Overweight with a $110 price target.
Ivankoe’s commentary comes after research firm Placer.ai published a Nov. 28 report that showed a sharp contrast in foot traffic performance for Starbuck’s Red Cup Day promotion this year from with previous years.
Starbucks gives away a free red cup to customers buying holiday drinks during this annual promotion. In 2020, 2021, and 2022, daily visits during Red Cup Day jumped by 74.4%, 65.0%, and 81.0%, respectively, compared with the daily visit average for the five weeks before the promotion, according to Placer.ai. In 2023, visits rose 31.7% on Red Cup Day compared with the previous five week daily average.
The drop in Red Cup Day traffic from prior years can be partially attributed to the union walkout held that day by members of Starbucks Workers United. The protest was more salt in the wound for Starbucks, which has been experiencing union protests and demands for better pay, hours, and health insurance for several years now. On top of the walkouts, workers were asking customers not to buy from Starbucks that day.
Starbucks has also noted a general difficult consumer environment as inflation and interest rates remain high, along with a challenging geopolitical environment. At the Morgan Stanley Global Consumer & Retail Conference on Tuesday, Chief Executive Laxman Narasimhan said “there’s no question that what you see out there, the geopolitical challenges are large. There are clearly headwinds out there.”
In addition, the company has faced boycotts. In October, the Starbucks sued Workers United after the union made a social media post on X that said “Solidarity with Palestine.” In response to the suit, social media users called for people to stop visiting the coffee chain. As of Wednesday, the hashtag #BoycottStarbucks has about 165 million views on TikTok.
“As the violence against the innocent in the region continues, some people are mistakenly tying these remarks to us, because Workers United and its affiliates and members continue to use our name, logo and intellectual property,” Starbucks wrote in a statement on Oct. 18.
The union filed its own suit against Starbucks in response.
When asked to provide a comment for this article, Starbucks said it had nothing further to share relative to the business. However, it pointed Barron’s to the Oct. 11 all-company email from Sara Kelly, Starbucks’ EVP and chief partner officer. Kelly wrote that “Starbucks unequivocally condemns acts of hate, terrorism and violence.”
Starbucks also pointed out to Barron’s that it recently reported record fourth-quarter revenue of $9.4 billion in November. That beat analyst estimates of $9.23 billion.
Shares of the coffee chain are now down 2.2% this year.
Write to Angela Palumbo at [email protected]
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