Starbucks Has Never Been More Expensive
Over the past 10 years, Starbucks prices are up more than inflation. It does not have much leverage to get customers back into its stores. The post Starbucks Has Never Been More Expensive appeared first on 24/7 Wall St..
McDonald’s Corp. (NYSE: MCD) CEO Chris Kempczinski recently said same-store sales were in trouble because, to some extent, its menu was too expensive, particularly in a time of an uncertain economy. Starbucks Corp. (NASDAQ: SBUX) has a similar problem, and it may be worse. Over the past 10 years, Starbucks prices are up 39%, while inflation during the same period is 31%. The study also showed how many hours people had to work in every state to buy a $5.24 drink at the coffee store chain.
24/7 Wall St. Key Points:
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Over the past 10 years, Starbucks Corp. (NASDAQ: SBUX) prices are up more than inflation.
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It does not have much leverage to get customers back into its stores.
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Many of the components used at Starbucks have gotten more expensive, although the company hedges prices of some items. Nevertheless, the price of coffee has risen threefold since 2019. Cacao prices have risen fivefold over the same period.
Comparable store prices have contributed to recent Starbucks earnings growth. In the most recent quarter, global comparable store sales were up 1%. Comparable store transactions fell 2%. The “average ticket” rose 1% for the same period. CEO Brian Niccol mentioned a “tough consumer environment.”
Fortune recently reported on the challenge of rising prices: “But the top reason customers say they’re going to Starbucks less often is its high prices, according to recent research from Deutsche Bank analysts.” The same analysts pointed out that tariffs may make the challenge more difficult.
Niccol does not have much leverage to get customers back into Starbucks stores. He has simplified the menu, one result of which he hopes will be shorter waiting times for orders. He closed bathrooms to people who are not customers. His “Back to Starbucks” plan includes turning the stores back into community coffee houses. He wrote, “Imagine coffeehouses that are comfortable and warm with expanded seating options, power outlets, and abundant food displays.”
For some reason, he limited how baristas dress and put into place a dress code for them. This is as if customers cared and baristas would accept it as a good idea, which some have not.
Starbucks is still plagued by several unresolved problems. One problem is that it runs out of certain menu items during the day at some locations. It is a good way to disappoint customers.
The company’s financial results remain lackluster. The market has punished it. Over the past month, while the S&P 500 is up 10%, Starbucks stock has risen less than 4%.
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