Is Starbucks (SBUX) A Good Investment Despite Soft Sales?
Zacks Investment Research | Aug 18, 2016 11:08PM ET
We issued an updated research report on Starbucks Corporation (NASDAQ:SBUX) on Aug 17.
On Jul 21, Starbucks reported soft third-quarter fiscal 2016 results. Adjusted EPS of 49 cents per share were in line with the Zacks Consensus Estimate. Further, earnings grew 17% year over year as strong margins and lower-than-expected taxes mitigated the slow sales growth.
Though sales rose 7% year over year, it missed the Zacks Consensus Estimate. Sales were primarily hurt by a slowdown in comps and traffic trends. Global comps grew 4%, lower than 6% in the previous quarter, owing to a slowdown in traffic in the flagship U.S. market. The disruption due to the changes in the rewards program and its negative impact on one of the most popular yearly promotion - Frappuccino Happy Hour - impacted sales in the U.S. At the call, management also stated that the political uncertainty and the ‘’profound weakening in consumer confidence’’ has hurt overall restaurant traffic trends in the country.
Importantly, comps growth in the U.S. went down below 5%, ending its impressive streak of 25 straight quarters of comparable-store sales growth of 5% or greater. Third quarter comps were also weak in Europe and Japan.
Following the weak sales performance in the quarter, the company curtailed its full year issued sales and comps outlook.
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