Starbucks Shifts Strategy: Fewer Deals, More Focus on Quality Coffee and Holiday Favorites

Starbucks Corp SBUX is scaling back on promotions under new CEO Brian Niccol. The company is focusing on premium coffee after a year of heavy discounting, the Wall Street Journal reports.

Since Niccol's appointment in August, the coffee chain has reduced its discounts, aiming to improve in-store experiences and reinforce its premium image, the WSJ cites company executives and baristas.

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In September, Brian Niccol, on his second day as Starbucks CEO, announced plans to return the company to its roots as a community coffeehouse.

Niccol is known for turning around Chipotle Mexican Grill, Inc. CMG and Taco Bell, which is owned by Yum! Brands, Inc. YUM is Starbucks' fourth CEO in two years. He takes over amid declining sales and pressure from employees and investors.

Starbucks has experienced falling sales for two consecutive quarters. Customers have complained about high prices, slow app orders, and subpar food options.

The company has also faced union organizing efforts due to dissatisfaction with working conditions, pay, and benefits.

Now, the company has moved away from broad offers and will emphasize seasonal drinks through holiday advertising instead of discounts.

Under Niccol, the focus is shifting toward delivering high-quality, handcrafted coffee and improving customer service rather than relying on frequent offers and deals.

After years of raising menu prices, restaurant chains like Starbucks have increasingly used discounts this year to attract customers. Executives explained that price hikes were needed to offset rising costs and wages.

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Starbucks' third-quarter revenue was $9.10 billion, lagging the analyst consensus estimate of $9.24 billion. The company reported EPS of $0.93, in line with consensus analyst estimates. Comparable store sales declined 3% due to a 5% decline in comparable transactions.

Starbucks stock gained over 2% in the last 12 months. In September, Jefferies analyst Andy Barish downgraded Starbucks from Hold to Underperform and lowered the price target from $80 to $76.

Investors can gain exposure to Starbucks through Invesco QQQ Trust, Series 1 QQQ, and SPDR S&P 500 SPY.

Starbucks Stock Prediction For 2024

Equity research can be a valuable source of information for learning about a company's fundamentals. Analysts create financial models based on the fundamentals and expected future earnings of a company to arrive at a price target and recommendation for the stock.

Shares of Starbucks have an average 1-year price target of $97.68, representing an expected upside of 2.23%.

Because of differences in assumptions, analysts can arrive at very different price targets and recommendations. 2 analysts have bearish recommendations on Starbucks, while 18 analysts have bullish ratings. The street high price target from Evercore ISI Group is $120.0, while the street low from Jefferies is $76.0.

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