Should Investors Buy Starbucks Stock as It Looks to Turn the Corner?
News of some progress in turning around its lagging same-store sales was not enough to keep share prices of Starbucks (NASDAQ: SBUX) from dropping, partly because its fiscal second-quarter earnings fell well short of expectations. The stock now trades below the initial surge it experienced following the announcement that former Chipotle head Brian Niccol would assume the position of CEO.Niccol was not left with an easy task, and he has decided to invest in human labor over just equipment as a way to increase efficiency and enhance the customer experience. This was something that I wrote needed to be done before he took over, even though it would lead to higher expenses, and something I predicted Niccol would do back in September.The decision led to higher expenses in the quarter, with store operating expenses climbing 12% year over year and increasing to 47.7% of revenue compared to 43.5% a year ago. Starbucks' overall operating margin contracted 450 basis points to 8.2%, which it said was largely due to the "surgical addition of labor into [its] stores." Continue reading
News of some progress in turning around its lagging same-store sales was not enough to keep share prices of Starbucks (NASDAQ: SBUX) from dropping, partly because its fiscal second-quarter earnings fell well short of expectations. The stock now trades below the initial surge it experienced following the announcement that former Chipotle head Brian Niccol would assume the position of CEO.
Niccol was not left with an easy task, and he has decided to invest in human labor over just equipment as a way to increase efficiency and enhance the customer experience. This was something that I wrote needed to be done before he took over, even though it would lead to higher expenses, and something I predicted Niccol would do back in September.
The decision led to higher expenses in the quarter, with store operating expenses climbing 12% year over year and increasing to 47.7% of revenue compared to 43.5% a year ago. Starbucks' overall operating margin contracted 450 basis points to 8.2%, which it said was largely due to the "surgical addition of labor into [its] stores."
