Starbucks (Ticker Symbol: SBUXWealth Strength IndexSBUX is Extremely Down and trending Down) has future plans to cut back store growth and has decided to close poorly performing store locations in highly populated areas. The company usually closes around 50 of these stores each year, however, this year they plan on closing around 150 locations. Starbucks also announced that it is reducing the number of licensed stores it will open this year by approximately 100 new stores.
The Seattle based company is staying faithful to its investors and expects to return around $25 billion in cash to shareholders, which is $10 billion higher than its previous forecast last quarter. The company will continue to follow through with its share repurchase program through 2020 and is going to increase its quarterly dividend by 20%.
Starbucks has been working on a number of things to help turn around its sales. The company began offering more varieties of cold beverages which now make up close to half of Starbucks’ business. Additionally, Starbucks is adding new lunch items to its menu to help bring customers into its stores after the usual morning rush. The company is now championing its “refreshment” category which includes Teavana brand iced teas and a line of fruit-flavored, lightly caffeinated drinks called “Refreshers.” Over the past year, this category has grown to become 12% of Starbucks’ revenue. Starbucks’ famous blended Frappuccino beverages are no longer the major sales drivers they once were. Year-to-date Frappuccino sales are down 3% and now make up about 11% of the company’s revenue.
Starbucks had a rough start to 2018 trading lower in the first two quarters before finding support at just under the $50.00 price level. The stock then proceeded to trade higher, eventually breaking above its 2018 downtrend and trading back above both its 100 and 200-day Moving Averages. Starbucks pressed higher led by a positive earnings report in the fourth quarter of 2018. The stock found some support in early 2019 just above its 100-day Moving Average before blasting off and racing to an all-time high of $78.74 which it achieved on Tuesday.
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Based on a survey of 19 analysts offering 12-month price targets, the average price target for Starbucks’ stock is $77.65. According to that number, the stock is priced right in-line with Wall Street’s analysts’ average price targets and could be considered at value around current levels near $77.96.
Starbucks is currently trying to grow the number of people who use its loyalty program and its mobile app. In just one quarter the company added 5 million new digital customers and 2 million Starbucks Rewards members, which was up 13% from last year. The coffee giant has been working on a number of ways to turn its sales numbers around and it seems to be stepping in the right direction given its stock performance.