Businesses and investors alike have been tested during the spread of the novel coronavirus. The ability to adapt to new and challenging circumstances has been crucial. Owning Starbucks (NASDAQ:SBUX) stock through March and April has been tough, but there’s hope on the horizon.
Foot traffic in Starbucks cafes has been greatly reduced over the past several weeks. However, even while the public waits for the coronavirus curve to flatten out, Starbucks has taken steps to transition into a post-pandemic world.
It’s the company’s adaptability that will enable it to thrive. If you owned shares but sold them at the bottom, you will probably miss out on a rebound in SBUX stock. And if you haven’t dumped your shares yet, a patient outlook may be rewarded.
Facing Hard Times
In the months leading up to the coronavirus outbreak, Starbucks was doing well. If we rewind to the company’s most recently reported earnings on Jan. 28, we’ll see some encouraging numbers.
During the company’s first fiscal quarter, Starbucks’ earnings grew by 5%. Plus, the company’s sales increased by 7%. Under normal circumstances, figures like those would be enough to spur a buying spree among Starbucks stock traders.
However, the shares traded lower by as much as 3.4% because the coronavirus was in the headlines and Starbucks warned investors that it would “materially affect” the company’s future results. As it turns out, Starbucks was right to make that prediction as the company would soon face a prolonged period of hard times.
But those hard times can’t and won’t last forever. In January, Starbucks had to close down more than half of its cafes in China. However, by late February, Starbucks CEO Kevin Johnson had announced that 85% of the company’s Chinese cafes were operating again.
“With the number of new cases in China slowing, we are seeing the early signs of a recovery in the region,” commented the CEO at that time. With around 4,300 cafes in China, that nation represents Starbucks’ second-largest market. So, the re-openings were a very positive development.
Starbucks’ New Phase
Then there’s the question of Starbucks’ North American markets. On March 21, Starbucks closed the majority of its cafes throughout the United States and Canada. Service was limited to delivery and drive-through.
At first, this restriction was only supposed to remain in place for two weeks. However, as we now know, the spread of the coronavirus has continued since Starbucks imposed the restriction. Understandably, the company has extended the restriction to May 3.
This is challenging, but the company can still earn revenues during this time. With around 15,000 cafes in the country, approximately 60% of Starbucks’ U.S.-based locations currently offer drive-through service.
Even with that revenue coming in, Starbucks is preparing to move forward with the re-opening of a “significant” number of its cafes in May as the company believes “progress” is being made in the coronavirus-containment efforts.
Evidently, the company is seeking to return to a semblance of normalcy in America like it has been doing in China. “As we have experienced in China, we are now transitioning to a new phase that can best be described as ‘monitor and adapt,'” commented Johnson.
Progress in the battle against the spread of the coronavirus will be crucial in Starbucks’ recovery. However, Johnson strikes a confident tone about this progress. He explains, “There is evidence many markets have in fact ‘flattened the curve’ and are now beginning to see a decline in the number of new confirmed COVID-19 cases … This is prompting many to define the next steps.”
And indeed Starbucks is defining its next steps as the public’s need to socialize and consume coffee can’t be contained forever. A flattening of the coronavirus curve would give consumers the green light to return to Starbucks and, hopefully, a more normal way of life.
The Final Word on SBUX Stock
It won’t be quick or easy for Starbucks and its customers to return to normalcy after the spread of the coronavirus. Nonetheless, investors should continue to hold onto their SBUX stock shares. Even with its challenges, Starbucks is already “monitoring and adapting” in preparation for its next phase.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
