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Starbucks Corp SBUX

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Strong U.S. Results Outshine International Pressure; We Raise our Fair Value Estimate for Starbucks

Sean Dunlop Equity Analyst

Analyst Note

| Sean Dunlop |

Wide-moat Starbucks reported strong fiscal 2021 third-quarter earnings, with a sharp year-over-year bump in guest traffic driving 84% comparable store sales growth in the Americas segment, or 9% relative to 2019's level, though visits remained 10% below prepandemic volumes. Notably, the segment's operating margin clocked in at 24.4%, the highest since the third quarter of 2017, as cost savings from store footprint rationalization and sales leverage more than offset supply chain pressure and wage increases. While the initial market reaction was negative (shares down about 3% in post-market trading), likely attributable to lowered guidance in the international unit, we anticipate raising our fair value estimate to $109 from $107 prior, on operational improvements, an impressive ability to defray inflationary pressure, and sustained strength in consumer-packaged goods.

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Company Profile

Business Description

Starbucks is one of the most widely recognized restaurant brands in the world, operating 33,300 stores across 83 countries as of June 2021. The firm operates in three segments: the Americas, international markets, and through retail channels via channel development. Starbucks primarily generates revenue from company-operated stores, with additional sales coming from royalties, sales of equipment and products to license partners, ready-to-drink beverages, fresh coffee, and single-serve coffee products.

Contact
2401 Utah Avenue South
Seattle, WA, 98134
T +1 206 447-1575
Sector Consumer Cyclical
Industry Restaurants
Most Recent Earnings Jun 30, 2021
Fiscal Year End Sep 27, 2021
Stock Type Cyclical
Employees 349,000

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