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SBUX Stock Alert: What to Know as Starbucks Faces Largest-Ever Strike


  • Shares of Starbucks (SBUX) stock moved higher despite possible labor strike consequences.
  • Earlier this week, the Workers United union urged employees to walk out on Red Cup Day.
  • Short covering may have pressured SBUX stock upward despite the bad news.
SBUX stock - SBUX Stock Alert: What to Know as Starbucks Faces Largest-Ever Strike

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Seemingly contradicting underlying negative implications, shares of coffeehouse giant Starbucks (NASDAQ:SBUX) popped modestly higher on Thursday. Earlier this week, the Workers United labor union urged employees at hundreds of Starbucks stores to walk out during the company’s popular Red Cup promotional event. Citing staffing and scheduling issues, the union is calling for improved conditions. Still, SBUX stock gained, likely on short covering.

According to a Reuters report, Starbucks hands out free reusable holiday-themed cups with coffee purchases during the one-day promotion. Despite the fact that many loyal Starbucks customers circle the event on their calendars, Workers United broadcasts a different take. Notably, it asserts that Red Cup Day is “one of the most infamously hard, understaffed days for the baristas.”

Subsequently, the union called on baristas and supervisors at all Starbucks stores to walk out today. Last year, the union called for protests at more than 100 locations. Per the latest update from Reuters, workers have indeed done just that. Outside the coffeehouse’s Astor Place outlet at the New York University campus, about a dozen workers picketed, chanting: “No contract, no coffee.”

At that particular protest, some picketers complained that a shortfall of workers materialized ahead of the Red Cup event.

Scheduling Pressures Clash With SBUX Stock Investors’ Interests

Likely driving the conflict between the rank and file and Starbucks executives is the company’s underlying performance. Earlier this month, the coffeehouse posted consolidated net revenue of $9.4 billion during its fiscal fourth quarter, a record haul. However, due to the broader changes stemming from the Covid-19 pandemic, many service industry workers refused to return or simply walked out.

For SBUX stock, the financial print confirms that the brand enjoys significant purchasing power. In the fourth quarter, gross margin jumped to 29% from 25.65% one year earlier. However, workers believe that such a robust print is coming at the expense of their wellbeing.

Per CNBC, Starbucks workers in New York City filed complaints against the enterprise for violating the city’s labor laws. Specifically, the state’s Fair Workweek law declares that employers must give their workers regular schedules from week to week. As well, 14 days’ notice of shift changes, among other requirements, must be provided.

Although the news isn’t flattering for SBUX stock, it still managed to move higher. Much of this counterintuitive upswing could be stemming from short covering motivations. Specifically, Fintel’s options flow data shows that major entities on Nov. 8 sold 5,298 contracts of the Nov 17 ’23 95.00 Call.

However, this trade is going bad, which may require a covering to mitigate damage. However, bears must buy back the underlying security they are short, creating upside pressure.

Why It Matters

Another reason for the counterintuitive rise in SBUX stock could be the perceived limited impact. Per Reuters, Starbucks has nearly 10,000 U.S. company-owned locations. However, less than 3% of these stores feature union representation.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

Article printed from InvestorPlace Media, https://investorplace.com/2023/11/sbux-stock-alert-what-to-know-as-starbucks-faces-largest-ever-strike/.

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