Starbucks: Slow Progress, But Small Improvements Are A Glimmer Of Hope

Summary

  • Starbucks shows slow progress in turnaround efforts, with modest improvements in China and operating margins, but overall financials remain pressured.
  • Management is investing heavily in labor and operational improvements, aiming to restore pre-pandemic margins, though this will take time and continued effort.
  • Dividend remains covered but with little room for error; expect only modest increases as free cash flow is pressured near term but projected to improve long term.
  • Given ongoing headwinds, a saturated market, and limited near-term upside, I maintain a 'Hold' rating until clearer margin improvements emerge.
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Starbucks Coffee Shop in India

Introduction

Starbucks (NASDAQ:SBUX), the coffee behemoth once known as a high-growth stock, has been dealing with headwinds for the past few years. And despite a recent earnings report that saw EPS decline year-over-year, the stock experienced a pop in price.

This article was written by

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Contributing analyst to the iREIT+Hoya Capital investment group. The Dividend Collectuh is not a registered investment professional nor financial advisor and these articles should not be taken as financial advice. This is for educational purposes only and I encourage everyone to do their own due diligence. I'm a Navy veteran who enjoys dividend investing in quality blue-chip stocks, BDC's, and REITs. I am a buy-and-hold investor who prefers quality over quantity and plans to supplement his retirement income and live off dividends in the next 5-7 years. I aspire to reach and help the hard working, lower and middle class workers build investment portfolios of high quality, dividend-paying companies. I also hope to give investors a new perspective to help them reach financial independence.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of SBUX either through stock ownership, options, or other derivatives. 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.

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