Starbucks Proves Its Worth By Adapting to the ‘New Normal’

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One negative impact of the spread of the novel coronavirus is the disruption to people’s habits. For instance, the routine of getting a morning coffee has been broken. As we might expect, this has taken a toll on Starbucks (NASDAQ:SBUX). However, it looks like the sellers of SBUX stock are exhausted and the buyers may be regaining control.

SBUX Stock Proves Its Worth By Adapting to the 'New Normal'

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Right now, the stock is working its way back up from the 52-week low price of $50.02, which it reached on March 18. It still hasn’t regained its all-time high price of $99.72 from July of last year.

Even beyond the technical aspects of SBUX stock, we can find signs of a coffee giant in recovery mode. Granted, it could take a while before those old coffee-drinking habits return as the public is still somewhat hesitant to venture outside.

Is there enough positive data, then, to back up the thesis that Starbucks’ stock will return to the near-$100 level?

Monitoring and Adapting

In mid-March, America was entering into crisis mode and, to a certain extent, so was Starbucks. As you may recall, there wasn’t as much talk of reopening businesses back then as there is today. And, people were still getting used to the idea of social distancing and shelter-in-place mandates.

In response to all of this, Starbucks pivoted towards a drive-thru and delivery-only policy. Even prior to that move, Starbucks had removed the seating inside of its stores as well as on the patios to promote social distancing between patrons.

With all of that in mind, it should come as no surprise that Starbucks’ second fiscal quarter of 2020, which ended on March 29, reflected some pandemic-induced financial issues. For instance, the company’s quarterly global comparable-store sales fell 10%.

Moreover, Starbucks reported $6 billion in quarterly consolidated net revenues, indicating a year-over-year decline of 5%. The company fully admitted that this was due to “lost sales related to the COVID-19 outbreak.”

And those lost sales, in turn, were the result of “temporary store closures, modified operations, reduced hours, and reduced customer traffic.” In response, Starbucks declared that it’s entering into a “monitor and adapt” phase with a goal of reopening its stores.

That’s encouraging, but is Starbucks making progress in its efforts to adapt and, most importantly, get patrons back into its stores?

Wake Up and Smell the Coffee

From the outset, Starbucks’ success wasn’t only about the coffee itself. Store re-openings are truly the key to Starbucks’s recovery as people want not just the coffee but also the atmosphere and the chance to interact with people.

Fortunately, the company is on track in its pledge to adapt and bring its patrons back inside the stores. To that end, during the second week of May, Starbucks reopened over 85% of its stores.

By early June, Starbucks hopes to reopen over 90% of its U.S.-based company-operated stores. CEO Kevin Johnson reported good progress in this endeavor, saying, “[We] are tracking slightly above our forecasted recovery curve.”

But then, Starbucks doesn’t wholly depend on its U.S.-based sales. The company also has a strong presence in China. And fortunately for SBUX stock owners, there’s good news on that front as Starbucks has reported that 90% of the company’s stores in China are now open.

Not only that, but Starbucks also reports that it has reopened many of its 1,550 stores in Japan. Plus, Starbucks disclosed its plan to open the company’s cafes in Italy, with the exception of its flagship store located in central Milan.

The Takeaway on SBUX Stock

There’s no way to know exactly when SBUX stock will get back to the $100 area. However, Starbucks’s adaptation-and-recovery plans show great promise. Shareholders should just sit tight, have a cup of joe, and observe as the coffee-drinking public gradually comes back to Starbucks.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarketsFinom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2020/05/sbux-stock-proves-worth-adapting-new-normal/.

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