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Starbucks (NASDAQ: SBUX) hasn't been energizing investors' portfolios in recent years. After hitting a peak in July 2021, shares dipped 43% in the 11 months that followed. It has been a volatile journey since then as the chain has gone through a period of softer demand, leadership changes, and a strategic overhaul.
Even after a surge that started last summer, the restaurant stock is still trading 15% off its all-time high. That might make the shares enticing to investors who are looking to put some money to work.
Here are three things you need to know about Starbucks before you think about adding it to your portfolio.
1. Its turnaround efforts are just beginning
Perhaps no metric matters more to a retail-based operation such as Starbucks than same-store sales. A steadily rising figure indicates improving demand over time at existing locations. Starbucks has struggled in this regard recently; it just reported its fourth straight quarter of declining same-store sales. That weakness has been prevalent in both the U.S. and China, Starbucks' top two markets.
Brian Niccol, formerly CEO of Chipotle Mexican Grill, was brought on board as the new CEO of Starbucks in September to turn things around. His primary areas of focus so far have been on increasing foot traffic at Starbucks locations while also improving the barista and customer experiences. From an operational perspective, Niccol wants to drive corporate efficiencies with staff cuts.
When Starbucks reported results for its fiscal 2025 first quarter (which ended Dec. 29), Niccol sounded optimistic about the early progress on this "Back to Starbucks" strategy. "We've seen a positive response," he said on the earnings call.
2. Its moat is wide
If you're considering making an investment in Starbucks, it's worth understanding what makes the business special. In particular, the company possesses an economic moat that supports its industry position. Yes, it has been dealing with challenges recently, but the business has been relevant for decades, and that has value.
Starbucks' most important asset has got to be the brand. According to consultancy Interbrand, it's the second-most-valuable restaurant brand on the face of the planet, behind only McDonald's. By positioning itself as a premium offering that customers resonate with, providing high-quality coffee, and focusing on compelling store layouts and a top-notch digital platform, Starbucks can maintain its strong mindshare.
Piggybacking off of the previous topic, another of Niccol's core objectives is to boost Starbucks' image as an important place in communities -- somewhere that people want to be. He's working with a favorable hand.