Starbucks (SBUX) released its preliminary fourth quarter earnings on Tuesday, illustrating annual declines in revenue and same-store sales in the US and China. Starbucks is scheduled to share its official results on Wednesday, October 30, the first earnings release with Brian Niccol as CEO.
BTIG managing director and restaurant analyst Peter Saleh weighs in on Starbucks’ preliminary earnings results.
“The traffic number that we saw out of Starbucks in the US was aside from the pandemic, worse, the worst number we’ve ever seen, even worse than the Financial Crisis,” Saleh tells Yahoo Finance. “I don’t know if this is a pricing problem. In my mind, I don’t think it is. I think… this is a messaging problem, probably a throughput problem. I think they’re working hard on the marketing. You’re already seeing some of the marketing chain changing.”
Peter Saleh also weighed in on McDonald’s (MCD) response seen so far to its E. coli outbreak reported in certain states.
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This post was written by Luke Carberry Mogan.
Peter.
Let’s switch gears a little bit.
I wanna talk to you about Starbucks pre announcing their sales and EPS numbers and we know that transactions in the US were down 10%.
Is this a pricing issue for Starbucks or is it something something else potentially more sinister?
So, yeah, I, I look at the, the traffic number that we saw out of Starbucks in the US was um, aside from the pandemic worst, the worst number we’ve ever seen even worse than the financial crisis.
Uh, look, this is a, they’ve got a lot of work to do.
Uh, they have a new CEO, uh, keep in mind that this is the first time in Starbucks history, uh, that they have an external CEO with restaurant operating experience aside from Howard Schultz, the other three, CEO S did not have restaurant operating experience.
So I, I think that he brings a lot of insight uh from his prior positions that he can share and implement here.
So look, I, I don’t know if this is a pricing problem.
I, I, in my mind, I, I don’t think it is.
I, I think, you know, this is um a messaging.
Uh probably a throughput problem.
I think they’re working hard on the marketing.
You’re already seeing some of the marketing chain changing.
Um I think they’re gonna change some of the pricing.
Uh, they’re gonna change some of the technology.
Um, in our view, I think these are fixable issues.
They have the, uh in our view, a great brand, uh great real estate, unique menu and plenty of capital on the balance sheet to really uh ignite change here.
So, uh, you know, we like Starbucks 100 and $15 price target.
Uh, do think that some of these issues are probably gonna continue for the, the near term.
Uh, but I think a lot of changes is upon us in the next several months.
And Peter, I liked what you pointed out in your note here that the timing surprised you more than the actual result itself.
We’d love to have you back to talk a little bit more about Starbucks here in the future.
Peter.
So thanks so much for taking the time.
BT IG is the managing director and restaurant analyst.
Appreciate it.