Starbucks Analyst Gives 'Likeliest' Reason For Steep Sales Collapse, Rarely Seen 'Outside Economy-Wide Crises'

Starbucks Corp SBUX has been witnessing a steep decline in sales.

The recent pace of deceleration in the company's same-store sales has rarely been seen "outside economy-wide crises" like the 2008 global financial crisis and the Covid era, according to BofA Securities.

The Starbucks Analyst: Sara Senatore maintained a Buy rating on Starbucks, while keeping the price target unchanged at $108.

The Starbucks Thesis: In fiscal 2023, Starbucks’ North America business, which includes the U.S. and Canada, posted 9.2% same-store sales growth.

“In the middle of F1Q24 (C4Q23), momentum ground to a halt,” Senatore says. “The closest parallel is around [Chipotle’s] e-coli outbreak.”

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"Our recent price checks suggest SBUX pricing is very competitive with that of chained coffee peers" and the company's price hikes have been lower than competitors, despite its premium positioning, the analyst stated. "SBUX’s positive mix has persisted even into F24," she added.

"A sudden slowdown requires a sudden cause," Senatore wrote. "The cadence of the slowdown combined with the absence of the usual signs of consumer check fatigue suggest that a social media narrative around SBUX’s position on the Middle East may be the primary driver.”

The company's Net Promoter Score declined steeply from October to November 2023 and has not recovered since, the analyst added.

SBUX Price Action: Shares of Starbucks had risen by 0.64% to $73.58 at the time of publication on Monday.

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