3 reasons why Starbucks is a buy
While coffee isn’t really essential, many people find it difficult to get through the day without it. So while stores in the United States have almost completely closed, Starbucks (NASDAQ: SBUX) maintains its customers with drive-thru. While closing the sit-down and managing with fewer people on the outside, the company will likely experience a decline in sales for the current quarter. But that doesn’t stop him from paying employees and looking for clients.
It is this kind of attitude and effort that sets Starbucks apart and makes it such a solid investment option for many. As of March 25, Starbucks stock was down 27% year-to-date, making it a great time to consider adding that discounted stock to your investment portfolio. Here are three reasons why.
1. It will return to growth
While no one can say a return to growth will occur after the worst of the pandemic has passed, there is every indication that Starbuck’s stock price is recovering. It has such a lead in its activity that it is difficult to imagine competitors of a similar size operating at its level in the American market. Dunkin brands Group is sometimes mentioned for comparison purposes, but it operates a different restaurant concept. Even so, for comparison, Dunkin ‘made $ 1.4 billion in sales for fiscal 2019, while Starbucks grossed $ 26.5 billion in the same period.
Rather than resting on its laurels, Starbucks relentlessly innovates in products and technology. It is already seeing sales start to return to normal in China, where it has temporarily closed stores until COVID-19 is brought under control. About 90% of those stores are now open, and the company is confident that U.S. stores will reopen in the coming weeks as well.
2. He has a solid history
After the Great Recession of 2008-09, Starbucks was in a bit of trouble. Company co-founder and longtime executive Howard Shultz said in an interview at the time: “And so it was a death march from [statements that] The days of Starbucks are numbered, its best days are behind them, it is no longer relevant. The headlines on Wall Street were: McDonald’s Will Definitely Kill Starbucks. ”In 2008, Shultz returned as CEO of“ The Shipwreck ”and changed course, bringing the focus back to the customer. Starbucks experience “, which is about creating an atmosphere where customers like to come and have their cup of coffee. He introduced the idea of creating a community of partners and customers, where both participated in the development of the stores. .
This has been the key to its success since then, and the relentless drive to meet customer needs has motivated the company to invest in technology in order to strategically develop its capabilities as a mass producer of coffee where every cup is accompanied. with a personal touch.
This has played a role for Starbucks in increasing annual sales. Here’s what it looked like over the past five years:
Metric | 2015 | 2016 | 2017 | 2018 | 2019 |
---|---|---|---|---|---|
Year-over-year increase in net sales | 17% | 11% | 5% | 11% | 7% |
3. He takes care of his employees
A key part of the customer experience is investing in the workers of the company, which she calls partners. One example is that Starbucks was the first private company to offer stock options to part-time employees (before becoming a publicly traded company).
This is evident in the current situation, where the company has made several promises to its workers, including full paid time off for any reason until April 19, as well as disaster pay and mental health services.
Starbucks knows that happy workers are loyal workers and that loyal workers create a better environment for loyal and happy customers. Current CEO Kevin Johnson noted in a letter Monday that even after workers were told they could stay home and get paid, they still came to work the next morning, and he then decided to increase the wages of the workers who chose to take it up a notch. This type of processing is what allows the business to continue producing its product and generate income when a downturn occurs. And that’s why investors in restaurant stocks should think about buying Starbucks before its price goes up.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.