Starbucks earnings preview: COVID-19 slows sales recovery, but spring is improving

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Starbucks Corp. SBUX, -0.55% has already provided guidance for its fiscal first quarter and full year, but analysts are still looking forward to the coffee company’s next earnings announcement, scheduled for January 26 after the bell. closing, to gain visibility on the company’s COVID-19 recovery path. Starbucks is targeting first-quarter earnings per share in the range of 32 cents to 37 cents, and adjusted EPS of 50 cents to 55 cents. For fiscal 2021, the company is targeting EPS in the range of $ 2.34 to $ 2.54 and adjusted EPS in the range of $ 2.70 to $ 2.90.

Given the recent disclosure, we expect the focus to be on fiscal second quarter trends to date, although we expect management to continue to target a [comparable sales] recovery at the end of the current quarter, partly due to the difficult comparisons of January and February 2020, ”wrote RBC Capital Markets in a restaurant note published Thursday. RBC is rated higher than Starbucks stocks. Starbucks, like many other companies, has been hit by rising COVID-19 numbers, prompting investors to look for signs of recovery later on. Read: Starbucks Says Cold Drinks Have Generated More Than $ 1 Billion In Sales Over The Past Three Years AND: America Suffers Another 4,000 Deaths In A Single Day As Experts Welcome Fauci’s Return To The House Podium Blanca “As same-store sales cut in November and December is not unique to Starbucks, investors appear to be looking beyond short-term challenges for almost all concepts to brighter days in spring 2021,” they wrote. BTIG analysts led by Peter Saleh in a December note after the company’s investor day event. “While we expect Starbucks to make a full recovery once the vaccine is widely available, we do not see a catalyst for same-store sales over the next several months.” BTIG rates Starbucks shares as neutral. One of the things that could boost sales is the return of the Starbucks “Happy Hour” event. “The company recently suspended its Happy Hour promotion to protect workers in today’s environment, but its reintroduction next quarter could prove to be a major sales driver,” Stifel analysts wrote in a Dec. 16 note. Stifel rates the purchase of Starbucks stock with a price target of $ 115. Starbucks has an average overweight stock rating among the 34 analysts surveyed by FactSet. Analysts have an average price target of $ 109.40 for Starbucks stock. Here’s what to look out for during your Starbucks earnings report: Earnings: The FactSet consensus is for EPS of 55 cents, down from 79 cents last year. Estimate, what collective sources estimates from buy and sell analysts, hedge fund managers, executives, academics and others, forecast EPS of 59 cents. Starbucks has outperformed the FactSet EPS consensus in five of the last six quarters. Revenue: The FactSet consensus calls for revenue of $ 6.9 billion, down from $ 7.1 billion last year. Estimate the revenue forecast of $ 6.96 billion. Stock Price: Starbucks stock has gained 12.1% over the past year and 16% over the past three months. The benchmark S&P 500 SPX index, -0.20%, was up 15.7% over the past year. Plus: Grocery sales soared in 2020 due to COVID-19, but analysts are forecasting a return to Earth in 2021. Other elements: • Starbucks operations in China have largely recovered. “China has recovered rapidly, driven by holistic and calibrated measures, which were led by local health authorities,” said John Culver, president of Starbucks international channel development group and global coffee, tea and cocoa, during the event. for December investors, according to a FactSet transcript. “China’s economy has seen a strong recovery, as consumer behaviors have returned to pre-pandemic levels and retail sales have grown steadily since August.” Stifel highlights where China’s recovery is lacking: “Interestingly, in light of the recovery reports from the Chinese economy, management noted that the part of the business that remains to be recovered is that generated by international travel for both business and tourism. “Stifel said. “To that end, the team in China is working to replace those transactions, and sales in the country have accelerated in December from November.” UBS analysts say that digital is one of the factors that will continue to benefit growth in China. “Digital engagement continues to improve relative to its peers (app downloads and internal usage data), supporting future sales force, while Starbucks Now store development and the Alibaba partnership should support those trends. improved, “wrote analysts led by Dennis Geiger. Don’t Miss: Taco Bell Partners with Beyond Meat to Create Plant-Based Protein Starbucks Now’s format focuses on the delivery and use of “mobile order and checkout” for customers to digitally order and pick up their food and beverages. UBS rates Starbucks stock as neutral with a price target of $ 105. • Digital is important in other places too. “As QSR [quick-service restaurants] Accelerating investment in digital strategies as a result of the impacts of COVID-19, Starbucks is likely to continue to innovate to maintain its leadership position, “said UBS. Starbucks had 19.3 million members in its digital loyalty program at the end of the fourth quarter, the company said during its investor event. Those customers generate half of the company’s revenue. “We are already seeing a strong new membership as a result of our Stars for All upgrades that give members more ways to pay and earn Stars by leveraging the exceptional momentum we have with our digital flyer,” said Roz Brewer, COO of Starbucks, during the investment event, according to FactSet. “As more customers adopt our application and reap the rewards, we expect higher levels of engagement in the future. This makes us incredibly optimistic about member growth for fiscal 2021 and beyond. “• A rise in the minimum wage could be a factor in the future. Wedbush analysts point to the impact that the Democratic-led US government could have in the restaurant sector, specifically with the possibility of an increase in the minimum wage to $ 15. See: Yellen says that raising the minimum wage to $ 15 would have a ‘minimal’ impact on jobs, but the Office of the Budget of the Congress disagrees. Wedbush’s note focuses on casual dining chains where tips and sub-minimum wages are common, but wage costs could have an impact on Starbucks as well. “We also recently shared one. of our largest salary investments of at least a 10% salary increase for our partners, who already earn more than the minimum salary, “wrote the president exec Starbucks statement Kevin Johnson in a memo posted on the Starbucks website in December. Watch: Value or Growth Stocks? What sectors to watch in 2021? “With these investments, more than 30% of our US retail partners are currently at $ 15 per hour or more and we continue on our way to ensure that all US partners earn at $ 15 per hour. or more within two to three years. “MKM Partners is aware of the impact on margins.” Along with sales, the strength of margins remains in focus, during this fluid situation, as they take advantage of fixed costs and the returns from its logistics investments, should continue to be necessary to overcome P&L challenges on the salary front (traditional increases / inflation and changes), ”the analysts wrote. MKM rates Starbucks shares as neutral with a fair value estimate from $ 104.