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Starbucks Corp SBUX

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Morningstar’s Analysis

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Digital Engagement and Drive-Thru Throughput Support Resilience at Starbucks; Shares Fairly Valued

Analyst Note

| Nicholas Johnson, CFA |

A year after the coronavirus pandemic first shuttered Starbucks stores in China, the company demonstrated its continued dominance in the coffee space in the first quarter of fiscal 2021, with adjusted EPS of $0.61 that exceeded both our forecast of $0.52 EPS and its own guidance. While the firm has not been completely unscathed by the pandemic, we were encouraged by the growth of its rewards program (which reinforces Starbucks’ wide moat) and the improvements already seen in the international segment, particularly in China, which has set the road map to recovery for the rest of the business. As a result, we will not be making any material changes to our fair value estimate of $100, and shares strike us as fully valued.

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Company Profile

Business Description

Through a global chain of more than 32,600 company-owned and licensed stores, Starbucks sells coffee, espresso, teas, cold blended beverages, food, and accessories. The company also distributes packaged and single-serve coffee, tea, juice, and pastries through its own stores, grocery store chains, and warehouse clubs under the Starbucks and Teavana brands under the Global Coffee Alliance partnership with Nestle. In addition, Starbucks markets bottled beverages, ice creams, and liqueurs through partnerships with Pepsi, Anheuser-Busch, Tingyi, and Arla. In fiscal 2020, Starbucks' Americas segment (including the U.S.) represented 70% of total revenue, followed by the international segment (including China) at 22%, then channel development at 8%.

2401 Utah Avenue South
Seattle, WA, 98134
T +1 206 447-1575
Sector Consumer Cyclical
Industry Restaurants
Most Recent Earnings Dec 31, 2020
Fiscal Year End Sep 27, 2021
Stock Type Cyclical
Employees 349,000