Did Politics and Terror Really Ruin Starbucks Earnings? (SBUX)

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sbux stock - Did Politics and Terror Really Ruin Starbucks Earnings? (SBUX)

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Starbucks Corporation (NASDAQ:SBUX) dropped its fiscal Q3 earnings on Thursday, and SBUX stock is softening up as a result. After its third consecutive quarter missing sales targets, that’s hardly a surprise.

Did Politics and Terror Really Ruin Starbucks Earnings?, SBUX stock

However, what may be interesting to some investors is that SBUX stock took great pains to act like this last Starbucks earnings report was no big deal.

“On today’s call, we will demonstrate with clarity and specificity why our U.S. comps in Q3 were an anomaly, and that we have clear line of sight to returning our business to historic levels of comp growth, which has been at or above 5% for the past 25 consecutive quarters,” CEO Howard Schultz said yesterday during a call with analysts. He later added, “In Starbucks’s 24 years of public life, I can’t recall a quarter quite like this.”

If you’re wondering what the big stink was that upended SBUX stock, it wasn’t a major supply chain issue or the typical complaint about the weather that many retailers and restaurants trot out.

The culprit, according to Starbucks, was geopolitics and unrest at home and abroad depressing coffee sales.

Seriously.

What’s Really Going on with SBUX Stock?

“I think we have a situation where you have a very uncertain election. You have domestic civil unrest with regard to race. And I think the issues around terror have created a level of anxiety,”
said CEO Howard Schultz during the Q&A section of the conference call. “And so, we’re no longer looking at just an economic downturn. There are a number of things that we are facing as citizens, and I think the direction of the country.”

That’s an interesting excuse, to be sure. But it’s not really true.

Consider that in the same earnings call, CFO Scott Harlan Maw — the guy who actually crunches the numbers for Starbucks earnings instead of just spouting random opinions on geopolitics — said, “top line results in the U.S. [were challenged] due to less than expected sales lift from the launch of the new Starbucks Rewards program and Frappuccino Happy Hour and the high bar to clear from Q3 of last year.”

I’ll repeat that: the CFO blamed tougher comps, weaker-than-expected Frappuccino sales despite a big promotion and tepid response to a new loyalty program.

Now, it’s worth noting that the CFO also mentioned this quarter’s shortfall won’t change forecasts, and 15% earnings-per-share growth for SBUX stock is still the target for both this year and fiscal 2017.

But if you see the crazy idea out there, that Starbucks earnings were affected by things like terrorism and Donald trump, just roll your eyes and move on with your life.

This was another rough quarter for Starbucks because it simply isn’t connecting the same way it was a few years ago. That’s evidenced not just by the Q3 numbers, but also by the fact that SBUX stock is down about 4% year-to-date in 2016.

The reality is that Starbucks earnings reflect a consumer base that is a little jaded, and growth plans that may be losing momentum. And no politician is to blame for either of those facts.

Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/07/sbux-stock-starbucks-earnings-terror-politics/.

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