Starbucks Corporation Stumbles But Analysts Say Don’t Fret

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Starbucks Corporation Stumbles But Analysts Say Don’t Fret

Starbucks shares slipped today after the coffee chain posted lackluster earnings results. The stock declined 5.58% to $57.26 per share as analysts tried do some damage control today by emphasizing the company’s prospects for long-term growth. Starbucks posted adjusted earnings of 39 cents per share and $5 billion in revenue, with both numbers being in line with consensus estimates.

Starbucks sees strong same store sales growth

Kevin Kingsbury of The Wall Street Journal is one of many who see no reason for the downward share price movement in Starbucks stock. He noted that U.S. same store sales climbed 7% year over year, which puts it ahead of most other retailers, although management’s guidance wasn’t awe-inspiring. Kingsbury added that the company’s shares have been trading sideways over the last six months after skyrocketing 80% the previous year.

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One bright area some analysts are pointing to is the planned debit reward card, which Wells Fargo analysts see as being important in driving even more customer loyalty and engagement. They also believe it will help expand Starbucks’ ecosystem “into entirely new territories.”

Starbucks to ride high on loyalty program?

The coffee chain had positive things to say about its new loyalty program even though there have been a lot of complaints recently, said Bloomberg‘s Shelly Banjo. In February, she noted that loyalty members spend three times the amount non-loyalty members spend, and she believes that the loyalty program will convince customers to purchase more than just coffee as Starbucks looks to diversify its revenue stream into other products like food. The coffee chain modified its loyalty program earlier this year to base the points on dollars instead of the number of purchases so that customers would stop buying items in multiple transactions to get more points.

The Wells Fargo debit card will be an extension of the recently started loyalty program. The prepaid debit card will allow members of the coffee chain’s loyalty program earn points when they spend money at all other merchants, although the rewards can only be redeemed at Starbucks.

Mobile perks

According to Reuters, BTIG analysts talked up the company’s Mobile Order & Pay platform, which they described as “a significant competitive advantage and long-term sales driver” that outweighs any near-term disruption in sales. The digital payment platform enables customers to order and pay using the Starbucks app and then pick their orders up.

The company said usage of the mobile payments platform doubled in the second quarter as it processed 8 million transactions a month.

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Michelle Jones is editor-in-chief for ValueWalk.com and has been with the site since 2012. Previously, she was a television news producer for eight years. She produced the morning news programs for the NBC affiliates in Evansville, Indiana and Huntsville, Alabama and spent a short time at the CBS affiliate in Huntsville. She has experience as a writer and public relations expert for a wide variety of businesses. Email her at [email protected]
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