Starbucks (NASDAQ:SBUX) stock rose 2.5% in pre-market trading this morning after a second activist investor took a stake in the coffee chain.
Starboard Value has joined Elliott Management in demanding changes to boost shareholder value.
Starbucks opened today at about $76 per share, with a market capitalization of about $87 billion. The shares are down almost 20% in 2024 and last traded over $100 last November.
Trouble at Coffee Mill
Starbucks has problems around the world.
China, once the company’s crown jewel, saw sales declines of 11% in the latest quarter. Lower-price competitors are just one problem. American brands are suffering as tensions rise. The company’s sophistication is a bad fit for small Chinese towns and villages.
Belinda Wong, who has led the brand there since 2011, and Molly Liu, who joined her at the top last year, have tried innovating their way out. They introduced coffee flavored with olive oil and even pork. They also joined Starbucks’ rewards program to hotel chain Hilton (NYSE:HLT).
On the other side of Asia, Starbucks laid off thousands of employees early this year in response to “operating difficulties” caused by boycotts over the Gaza war.
In the U.S., Starbucks faces continuing unionization efforts despite winning a Supreme Court decision against activists. Rivals like Dutch Bros (NYSE:BROS) and Black Rifle (NYSE:BRCC), and chains serving “bubble tea” or boba are also taking share.
The activists may not care about any of this. They seem more interested in ideas like selling off the China business or boosting the dividend, which now yields 3%.
CEO Laxman Narasimhan took over just last year. He insists efforts to take back market share and improve profits through efficiency are bearing fruit. But he also faces continual criticism from the man who hired him, Howard Schultz.
SBUX Stock: What Happens Next?
Starbucks faces an existential crisis. It sought quick profits in tiny shops and automation, forgetting that people went to its stores to sit down.
The company’s identity crisis looks unlikely to be resolved soon.
On the date of publication, Dana Blankenhorn 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
