Entering text into the input field will update the search result below

Starbucks: People Are Expecting Too Much; The Big Growth Days Are Over

David Butler profile picture
David Butler


  • The brutal truth is that Starbucks has reached a mature stature within the US market and will probably struggle to ever gain back the massive sales growth of the past.
  • Sales estimates are being unrealistic regarding this issue, and in turn, shareholders are progressively being disappointed.
  • Starbucks' growth seems extremely reliant on China and faces staunch competition at home.
  • In what I view as the final lap in the Starbucks story, these overseas markets will be the final jolt for the stock. Without them, it seems unlikely that the company will ever live up to the earnings expectations being placed upon it.
  • When you consider the current tensions between China and the United States, this overseas dependence for growth is rather concerning.

Starbucks (NASDAQ:SBUX) stock took a big slip following first quarter results that underwhelmed analyst expectations. Revenue growth wasn't what Wall Street wanted, and store traffic in the United States is rather stagnant.

It's not like this is a big shocker. Starbucks has over 14,000 locations in the United States. How much bigger can you get? There's not much room left to grow. On top of that, there's a growing sentiment in the US to support smaller establishments. Perhaps it stems from the craft beer craze, but people are definitely trending toward supporting local establishments versus corporate conglomerates.

A renewed emphasis on "craft" is pervasive throughout the market, and it's carrying over into coffee. All of the "hipsters" (no offense meant) that used to be all about sitting in Starbucks are choosing to do that at new places. They're going to places where you can say hi to the actual owner when you buy your coffee from them.

The effects of this type of shift are not without precedent. Look at Boston Beer Co. (SAM). Once the father of the craft beer revolution, Boston Beer's Samuel Adams lineup has faced mounting pressure for years from the onslaught of small startups; looking to snatch up market share in their local areas. Cowen and Co.'s analyst Andrew Charles has altered his price targets for Starbucks after finding similar trends in coffee shops. Independent/collective coffee shops are growing at more than double the rate that Starbucks is.

With small pieces of market share being taken by these small independent players, Starbucks faces a bitter conflict in the United States. So where does the future growth come from? The answer is China. Nowhere is this more prevalent than the company's first quarter (fiscal Q2) results.

Net earnings of $660.1 million mark a very lax 1.1% increase from

This article was written by

David Butler profile picture
Bit of a stock nerd. Contributor for SeekingAlpha and Jim Cramer's Real Money. I like earnings, and have very little time for chart analysis. It doesn't matter how many squiggles a chart has if the company doesn't drive meaningful earnings per share.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.