The restaurant and food service industry is struggling to regain momentum after being hit hard by the pandemic. Restauranteurs are currently busy adapting to the changed operating conditions, shifting focus from on-premise to off-premise dining. In the second half of 2020, coffee chain Starbucks Corporation (NASDAQ: SBUX) reported its first quarterly loss in seven years despite having a full-fledged digital platform and relatively stable supply chain, which indicates the severity of COVID impact on the sector.
Investing in SUBX
Though Starbucks’ shares pulled back after the post-earnings rally in July, they continue to stay above the long-term average and outperform the broad market. The moderation in value can be seen as a buying opportunity, given analysts’ bullish outlook that suggests double-digit growth in the next twelve months. The company’s proven resilience and ability to adapt during times of adversity make the stock a safe bet, especially for long-term investors.
Read management/analysts’ comments on Starbucks’ Q3 2021 earnings
Starbucks’ efforts to enhance customer experience and to have a sustainable supply chain are paying off. The shift to remote work had affected customer traffic as people stayed away from stores during the pandemic. The enhanced capabilities, both in the in-store and off-premises segments, position the company to maintain strong sales and emerge stronger from the COVID crisis.
What’s Brewing
Having restored revenues and profit almost to pre-pandemic levels, Starbucks looks set to take advantage of the ongoing market reopening supported by the vaccination drive. The diverse portfolio and impressive scale, together with the growing popularity of the menu – ranging from Freshly Brewed Coffee and Frappuccino to Cold Brew and Starbucks Refreshers — give the company an edge. Moreover, Starbucks’ total addressable market is expected to grow sharply in the next few years, offering a major opportunity for the brand that has global appeal.
The reopening of markets is translating to incredible increases in demand for Starbucks as people are again on the go, reconnecting and socializing with one another. Human connection is the very foundation of the Starbucks experience. The differentiated experience we create for our customers, strengthened through the actions we’ve accelerated over the past year, enables us to meet our customers wherever they need us to be.
Kevin Johnson, chief executive officerRecord Results
After slipping into the negative territory at the peak of the crisis last year, the company bounced back quickly and reported stronger-than-expected profit for four quarters in a row. In the third quarter of 2021, revenues surged 71% from last year’s pandemic lows and reached a record high of $7.5 billion. Adjusted profit was $1.01 per share, compared to a loss of $0.46 per share in the year-ago quarter. The numbers exceeded the management’s expectations as well as experts’ projections. Comparable sales grew a whopping 73% amid strong momentum both in the domestic and overseas markets, especially in China.
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In the past twelve months, Starbucks’ stock grew 34% and set new records regularly. It reached an all-time high in late July soon after the last earnings announcement, before paring most of those gains in the following weeks. The shares experienced further weakness early this month but recouped a part of the losses this week. They traded up 2% in the early hours of Tuesday’s session.