Will 2018 Be a Good Year for Starbucks?



2017 stock performance

2017 was a tough year for Starbucks (SBUX), with its stock returning only 3.4%. During the same period, peers McDonald’s (MCD), Dunkin’ Brands (DNKN), and Domino’s Pizza (DPZ) have increased their returns 41.4%, 22.9%, and 18.7%, respectively. Also, the broader comparative indices, the S&P 500 Index (SPX) and the Consumer Discretionary Select Sector SPDR Fund (XLY), have returned 22.5%, and 25.0%, respectively. However, Starbucks has started 2018 on a strong note, with its stock price rising 4.5% since the beginning of 2018.

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In fiscal 2017, Starbucks posted SSSG (same-store sales growth) of 3.0%, which was its lowest level since 2010. Also, the company failed to meet analysts’ SSSG estimate in all four quarters of fiscal 2017, which led the company’s stock price to fall as low as $52.70 on August 18, 2017. However, the stock price improved in the latter part of 2017 due to the expectations of a decline in corporate taxes via tax reforms.

Starbucks’s SSSG was negatively impacted by congestion at the hand-off counter due to a rise in mobile traffic in fiscal 1Q17, weakness in some core beverages sales in fiscal 3Q17, and a decline in traffic due to hurricanes Harvey and Irma in fiscal 4Q17.

Series overview

In this series, we’ll be looking at Starbucks’s revenue, SSSG, unit growth, margins, and EPS in fiscal 2017. We’ll also cover management’s guidance for fiscal 2018 and analysts’ estimates for the next three years. Finally, we’ll end the series by looking at the company’s valuation multiple and analysts’ recommendations.

First, let’s start our analysis with Starbucks’s fiscal 2017 revenue.


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