Easier Comps Ahead For Starbucks

Starbucks Corporation SBUX reported lower-than-expected U.S. comps as throughput constraints appeared to limit the ability to translate mobile order & pay adoption into better comps.

Starbucks’ American comps of 3 percent were below 3.9 percent Street view.

But, Bernstein’s Sara Senatore maintains her Outperform rating and $65 price target as she believes the Starbucks gap to the industry widened modestly and the two-year trend has been stable.

The analyst expects better execution and much easier compares (4 percent in second half versus 8 percent in first half) should support mid-single-digit comps.

“SBUX's comp gap to the industry expanded modestly and its (adjusted) traffic gap widened more meaningfully suggesting that it is still winning the battle for traffic, even with suboptimal operations,” Senatore wrote in a note.

Senatore also noted that Starbucks’ guidance reiteration despite significantly higher FX headwinds suggest it can achieve guidance at the low end of the mid-single-digit comp range. Starbucks, which reported an in-line EPS of $0.52, reaffirmed guidance of 15–16 percent EPS growth ($2.12–2.14) in FY 2017 on MSD comp growth.

Shares of Starbucks closed Thursday’s trading at $58.46. In the pre-market hours Friday, the stock was down 4.21 percent to $56.