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Starbucks: Are problems brewing at the coffee giant?
Image source, Getty Images
Article information
- Author, Natalie Sherman
- Function, BBC News
- Report from New York
-
June 9, 2024
Andrew Buckley, a self-described “mocha guy,” recently kicked his Starbucks habit, reeling after the company’s latest price increase sent the cost of his drink above $6.
The 50-year-old, who works in technology sales in Idaho, has been a loyal customer for decades, valuing his almost daily venti mocha as a small luxury that allowed him to stretch his legs during the workday.
But the company’s latest price increase went overboard.
“It was the final straw that broke the camel’s back on my feeling of inflation in general. It’s like, ‘This is it. I can’t take it anymore,'” says Buckley, who called customer service with complaints before taking to social media. media to ventilate.
“I just lost control,” he said. “I don’t plan on going back either.”
The decision was a sign of bigger problems brewing at Starbucks, which is facing new resistance from inflation-weary customers at the same time as unionization struggles and protests against the company are presented as a way to oppose to Israel’s war in Gaza, are provoking calls for a boycott and tarnishing the brand.
Image source, Andrew Buckley
Image caption Andrew Buckley now makes coffee at home or goes to The Human Bean, a smaller chain
The company’s sales were down 1.8% year-over-year worldwide in early 2024.
In the US – by far the company’s largest and most important market – sales at stores open at least a year fell 3% – the biggest drop in years outside of the pandemic and the Great Recession.
Among those who jumped ship were some of the company’s most committed customers – rewards members, whose active numbers marked a rare 4% drop compared to the previous quarter.
Former assistant David White says he has stopped nearly all of his Starbucks shopping in recent months, sometimes abandoning orders mid-purchase, horrified by the totals in his cart.
He says his outrage over the price increases has been reinforced by other company decisions, including the crackdown on workers seeking to unionize.
“They got really full of themselves,” says the 65-year-old from Wisconsin. “They are trying to squeeze too much out of their daily customers and profit from their employees and prices.”
For Andrew Buckley, the decision to leave the company depended on prices, but he notes that the various noises surrounding the company about political issues left a bad taste in his mouth.
“This is a coffee shop. They serve coffee,” he says. “I don’t want to see them on the news.”
In a conference call to discuss the company’s latest results, Starbucks Chief Executive Laxman Narasimhan said sales were disappointing, citing in part more cautious customers, while acknowledging that “recent misinformation” had weighed on sales, especially in the East. Average.
He defended the brand and promised to bring back business with new menu items like boba drinks and pesto egg sandwiches, faster in-store service and a flurry of promotions.
Chief Financial Officer Rachel Ruggeri said this week that the company was seeing signs of revival, noting growth in the number of active rewards members.
The company does not intend to back down on its expansion plans, but warned investors that the challenges will not disappear quickly.
“We believe it will take some time,” she said.
Image caption Friends Veronica (left) and Maria Giorgia (right) say they’ve noticed an increasingly corporate vibe at Starbucks
The company’s struggles have sparked debate over whether they are a kind of canary-in-the-coal-mine warning that the unlucky consumer spending that has driven the world’s biggest economy in recent years may be abruptly losing momentum.
As well as Starbucks, a number of other major fast-food brands, including McDonald’s, Wendy’s and Burger King, have reported falling sales, announcing discount offers to try to revive enthusiasm.
But many analysts believe Starbucks’ declining sales reveal more about the company than the broader economy.
“When you look back and see the magnitude of the change… that has occurred in such a short amount of time, it generally doesn’t point to anything macro in nature or price-related in nature,” says Sharon Zackfia, head of consumer at the management firm investment firm William Blair, who expressed concern in a note to clients last month that the brand could be losing its luster.
Image source, Getty Images
Image Caption: There were protests outside Starbucks branches across the country and calls for a ceasefire between Israel and Hamas
The company was already under pressure due to a years-long fight with union activists, who raised concerns about wages and working conditions that conflicted with the company’s progressive reputation.
Then, in late October, after Starbucks sued the union over a social media post expressing “solidarity” with the Palestinians, the dispute put it in the middle of debates over Israel’s war in Gaza, triggering calls for global boycott that took on a life of its own.
Starbucks – which is not the only American brand to face backlash over this issue and is not a target of the official Boycott, Divestment and Sanctions (BDS) movement – blamed misinformation about its views, after issuing a general statement condemning violence in the region.
It has also taken a different approach with the union in recent months – the two sides are now issuing joint press releases claiming progress in contract negotiations.
But calls for a boycott increased on social media in January and continue to persist, according to a Bank of America analysis.
Last month, YouTube comedian Danny Gonzalez apologized to his 6.5 million followers for the incidental presence of a Starbucks cup in a recent video following a backlash.
Although Starbucks executives remained relatively silent on the issue during sales discussions, as Zackfia says, “You’d really be burying your head in the sand if you didn’t think it had some effect.”
Bank of America analyst Sara Senatore says she was initially skeptical that the boycott would have a major impact, but other causes seemed insufficient to explain such a sudden and severe drop in sales, noting that the company’s price increases were not stand out from their competitors. .
She says a quick recovery could be a difficult task, comparing the impact to the brand crisis Chipotle faced after its stores were found responsible for triggering E-coli outbreaks that took years to eliminate.
“All you can do is try to dampen the sound or essentially overpower it with other things,” she says. “It may just be a matter of time.”
Image caption, Customer Maria Soare thinks Starbucks needs to improve its food
On a recent sunny midday in New York, where the density of Starbucks cafes is among the highest in the world, it was difficult to gauge the state of the business.
Some stores seemed empty, until customers coming in to place orders via cell phone punctuated the calm.
Even loyal drinkers said they saw opportunities for improvement.
Maria Soare, a 24-year-old who lives in the city of Washington, DC, still buys drinks from the company three or four times a week, but her patronage has decreased since the pandemic, when it served as a reason to leave the house.
She says the recent price increases “hurt” and advises the company to “change the food.”
For friends Verônica and Maria Giorgia, the atmosphere at the company has changed.
Veronica, 16, says she doesn’t go as much anymore due to a combination of better options elsewhere, rising prices and recent protests by labor activists.
“It opened my eyes,” she says. “It looks more like a chain.”
And although Maria Giorgia remains a regular customer, the 17-year-old says her perception of the company has changed.
“It used to be cool in high school. Now it’s just convenient.”
The spotlight next week will shift somewhat to the Federal Reserve’s second-quarter earnings season and monetary policy. Market watchers will be treated to results from several major names, including Dow 30 components Goldman Sachs (GS), UnitedHealth (UNH), Johnson & Johnson (JNJ) and American Express (AXP), along with streaming giant Netflix (NFLX).
The Fed will still attract some attention as investors will be eager to hear from a packed lineup of central bank speakers just before the policy meeting lockout period.
In terms of the economic calendar, after fifteen days of labor market and inflation indicators, activity data will gain momentum in the form of the latest retail sales and industrial production reports.
Earnings Highlight: Monday, July 15 – Goldman Sachs (GS) and BlackRock (Black). See the full earnings calendar.
Earnings Highlight: Tuesday, July 16 – UnitedHealth (UNH), Bank of America (BAC), Progressive (PGR), Morgan Stanley (IN), PNC Financial (PNC) and JB Hunt Transport (JBHT). See the full earnings calendar.
Earnings Highlight: Wednesday, July 17 – Johnson & Johnson (JNJ), US Bancorp (USB), Morgan Children (KMI), United Airlines (UAL) and Ally Financial (ALLY). See the full earnings calendar.
Earnings Highlight: Thursday, July 18 – Netflix (NFLX), Abbott Laboratories (ABT), Black stone (BX), Domino’s pizza (ZDP) and Taiwan Semiconductor Manufacturing (TSM). See the full earnings calendar.
Earnings Highlight: Friday, July 19 – American Express (AXP), Halliburton (THANKS) and Travelers (VRT (return to recoverable value)) See the full earnings calendar.
IPO Observation: Hospital and healthcare clinic operator Ardent Health Partners (TARDT), insurance service provider Twfg (TWFG) and the biotechnology company Lirum Therapeutics (LRTX) are expected to price their IPOs and begin trading next week. The analyst quiet period ends at Rectitude (RECT) to free up analysts to publish ratings.
Police cars outside the residence of Thomas Matthew Crooks, the suspected shooter at a Trump rally on Saturday, investigate the area in Pennsylvania. Following the incident, one rally attendee was killed, two rally attendees are in critical condition and Donald Trump suffered a non-fatal gunshot wound. The shooter is dead after being shot dead by the United States Secret Service. (Photo by Kyle Mazza/Anadolu via Getty Images)
Investors will initially favor traditional safe-haven assets and may lean toward trades more closely tied to former President Donald Trump’s chances of winning the White House after he survived an assassination attempt, according to market watchers.
“There will undoubtedly be some protectionist or safe-haven flows into Asia early this morning,” said Nick Twidale, chief market analyst at ATFX Global Markets. “I suspect gold could test all-time highs, we’ll see the yen being bought and the dollar, and flows into Treasuries as well.”
Early market commentary suggested Trump’s shooting at a rally in Pennsylvania on Saturday could also prompt traders to increase his likelihood of success in the November election. His support for looser fiscal policy and higher tariffs is generally seen as likely to benefit the dollar and weaken Treasuries.
An indicator of market sentiment heading into the weekend: Bitcoin surged above $60,000, likely reflecting Trump’s pro-crypto stance.
Other assets positively linked to the so-called Trump trade include stocks of energy companies, private prisons, credit card companies and health insurers.
Traders will also be closely watching market measures of expected volatility on Monday, such as those in the tariff-sensitive Chinese yuan and Mexican peso, which have begun to price in the U.S. vote.
Trump said he was shot in the right ear after a shooting at his rally. His campaign said in a statement that he was “fine” after the incident, which prompted him to rush off the stage.
“Currencies will be the first major market on Monday in Asia to react to the weekend’s shots. There’s potential for extra volatility, and getting a clear reading could be especially difficult because liquidity will be hurt by Japan’s national holiday,” said Garfield Reynolds, Asia team leader for Bloomberg Markets Live.
Strategists had already expected a volatile run-up to the election, particularly as Democrats are still agonizing over President Joe Biden’s candidacy after his poor performance in last month’s debate raised questions about his age. Investors were also grappling with the possibility that the election could end in a drawn-out dispute or political violence.
But there is little precedent for events like those in Pennsylvania. When President Ronald Reagan was shot four decades ago, the stock market plunged before closing early. The next day, March 31, 1981, the S&P 500 rose more than 1% and benchmark 10-year Treasury yields fell 9 basis points to 13.13%, according to data compiled by Bloomberg.
Bond investors should pay particular attention as the attack is likely to boost Trump’s election chances and ultimately lead to concerns about the fiscal outlook, according to Marko Papic, chief strategist at California-based BCA Research Inc.
“The bond market must at some point become aware of President Trump’s greater chances of winning the White House than any of his rivals,” Papic wrote. “And I continue to believe that as his chances increase, so too must the likelihood of a bond market revolt.”
Kyle Rodda, senior financial markets analyst at Capital.com, said he was seeing client flows into Bitcoin and gold following the shooting.
“This news marks a turning point in American policy norms,” he said. “For markets, it means safe-haven trades, but more tilted toward non-traditional safe-havens.”
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Jio Financial share price: Should you buy this Reliance group stock on Monday ahead of Q1 FY2024 results?
Q1 2024 Results: Jio Financial Share Price will be in focus on Monday as the Reliance Group company has a fixed board meeting on July 15, 2024 to consider and approve the company’s unaudited standalone and consolidated financial results. Trust Group company informed about the Q1 2024 Results date on Wednesday last week via an exchange filing. According to stock market experts, Jio Financial Services Limited is poised to deliver impressive Q1 results for FY25 on solid operating income. They have forecast a healthy QoQ PAT for the company in Q1 FY25.
Jio Financial Services News
Speaking on the Jio Financial Services Q1 2024 results, Manish Chowdhury, Head of Research, StoxBox, said, “We believe Jio Financial Services is poised to deliver impressive results in Q1FY25 aided by its operating income, which is likely to show robust growth driven by strong investment income, which in turn should lead to healthy PAT growth on a sequential basis. Jio Financial Services continues to make strategic moves such as launching digital products and expanding its ecosystem, with a clear focus on future growth. The company has announced plans to introduce products for lending against stocks and mutual funds, leveraging Jio’s large user base, which could be a significant growth driver in the coming quarters.”
“Furthermore, with the NBFC receiving RBI approval to become a primary investment company, Jio Financial Services is well-positioned to unlock value from its investments. Overall, we expect the company to report robust numbers in the upcoming quarter,” the StoxBox expert added.
Jio Financial Stock Target Price
Speaking about the technical outlook of Jio Financial share price, Ganesh Dongre, Senior Manager, Technical Research at Anand Rathi, said, “Jio Financial Services share price is poised to make a fresh high at the ₹260 apiece level. If the stock breaks above this mark, the Reliance Group stock could make a fresh high by touching the ₹290-₹295 zone. Hence, those with Jio Finance stock in their portfolio are advised to stick to the script by keeping a stop loss at ₹205. If the stock breaks above ₹260 decisively, then one can upgrade the stop loss at ₹240 for the near-term target of ₹295.”
On the advice to new buyers regarding Jio Financial stock, Ganesh Dongre said, “New buyers are advised to wait for the breakout. Once the stock breaks above ₹260, one can buy this Reliance Group stock at the short term target of ₹295, keeping a stop loss of ₹240 apiece.”
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage firms, and not of Mint. Investors are advised to consult with certified experts before making any investment decisions.
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