Why Is Starbucks (SBUX) Betting on Streamlining Amid Heightened Competition and Slowing Store Growth?

• On September 26, Starbucks announced a US$1 billion restructuring plan involving North American store closures and around 900 additional corporate job cuts, projecting a 1% decline in net unit growth for fiscal 2025.
• This substantial operational shift under CEO Brian Niccol is part of ongoing efforts to refocus resources and improve efficiency amid declining same-store sales and intensified competition.
• We’ll explore how Starbucks’ accelerated store downsizing shapes the company’s long-term growth outlook and overall investment narrative.

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Starbucks Investment Narrative Recap

Starbucks appeals to investors who believe in the company's ability to revitalize growth through operational efficiency and customer engagement, despite recent headwinds such as declining same-store sales and heightened competition. The US$1 billion restructuring and North American store closures announced in late September could impact Starbucks’ most important short-term catalyst, consistent transaction growth, while amplifying the biggest risk: sustained margin pressure from ongoing labor and operational costs. For now, the operational shift is meaningful and may influence near-term revenue and margin forecasts. Among recent announcements, the 1% increase in Starbucks’ quarterly dividend stands out as especially relevant. Even with the ongoing cost-cutting and restructuring, the company extended its record of annual dividend increases to 15 years, which will be closely monitored by investors seeking both yield and potential capital appreciation. The resilience of the dividend, however, now sits alongside near-term uncertainty regarding... In contrast, investors should be mindful that execution risks, especially ongoing margin pressures, could significantly shape Starbucks’ financial picture in the coming quarters.

Read the full narrative on Starbucks (it's free!)

Starbucks’ outlook forecasts $45.5 billion in revenue and $4.6 billion in earnings by 2028. This projection assumes 7.5% annual revenue growth and a $2.0 billion increase in earnings from the current $2.6 billion.

Uncover how Starbucks' forecasts yield a $97.63 fair value, a 24% upside to its current price.

Exploring Other Perspectives

Simply Wall St Community members shared 22 fair value estimates for Starbucks that span from US$54.97 to US$110 per share. With margin pressures building from restructuring and operational shifts, consider how differently community and analyst perspectives can frame the company's outlook.

Explore 22 other fair value estimates on Starbucks - why the stock might be worth as much as 40% more than the current price!

Build Your Own Starbucks Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Starbucks research is our analysis highlighting 2 key rewards and 4 important warning signs that could impact your investment decision.
• Our free Starbucks research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Starbucks' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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