Starbucks: Despite New Leadership Efforts, Customer Tastes Appear To Be Changing
Summary
- Starbucks faces weak sales growth, rising costs, and intense competition, making its premium valuation hard to justify despite management's rapid turnaround efforts.
- Consumer shifts toward specialty coffee, costly store renovations, and fierce competition in China and the U.S. threaten Starbucks' market share and profitability.
- Q2 results showed only modest revenue growth, declining U.S. traffic, and significant margin erosion due to higher labor and operating costs.
- At nearly 30x forward earnings and with no quick fixes in sight, I recommend avoiding Starbucks stock and waiting for a more attractive entry point.
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