Skip to Content
Morningstar

Signs of Encouragement From Undervalued Starbucks

We're planning to raise our fair value estimate after comparable-store sales reversal in U.S. and China.

Securities In This Article
Starbucks Corp
(SBUX)

In the U.S., the 4% comp was driven by a 5% increase in average ticket (2 points of pricing and the rest attributed to mix benefits from its cold beverage platform, which also helped to reverse recent weakness in the afternoon daypart) offset by a 1% decrease in transactions, which was an improvement of 2 points versus the 3% decline in the third quarter. China was a menu innovation story as the 1% increase in comps was aided by coffee plus ice cream products, cold foam, and holiday food items. We see a number of levers in both regions that should keep the company aligned with its fiscal 2019 comp guidance for the low end of its longer-term 3%-5% range, including digital engagement (Starbucks Rewards members jumped 15% to 15.3 million in the U.S. during a typically slower recruitment quarter), delivery (including new test markets in the U.S. and the partnership with Alibaba in China), and new store layouts (including drive-thru formats in the U.S. and Star Kitchen locations in Alibaba's Hema stores).

Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.

More in Stocks

About the Author

RJ Hottovy

Sector Strategist
More from Author

R.J. Hottovy, CFA, is a consumer strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is responsible for consumer discretionary and staples research. He has covered the consumer sector as an analyst and director of global consumer equity research for Morningstar since joining the company in 2008, and specializes in a broad range of consumer categories including restaurants, footwear and apparel retailers, consumer electronics retailers, fitness clubs, home improvement and furnishing retailers, and consumer product manufacturers.

Before joining Morningstar, Hottovy was a director and senior stock analyst for Next Generation Equity and an analyst for William Blair & Co., specializing in a wide range of retail and consumer product companies. He also spent two years at Deutsche Bank, covering waste management, water utilities, and equipment rental stocks.

Hottovy holds a bachelor’s degree in finance and a second degree in computer applications from the University of Notre Dame, where he graduated magna cum laude. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Institute and the CFA Society of Chicago.

Sponsor Center