Starbucks (SBUX) is struggling to maintain its revenues, income, and share value despite six quarters of revenue growth.
For example, Starbucks’ share value fell from $111.82 on 20 September 2021 to $84.17 on 23 September 2022. Conversely, Starbucks quarterly revenues fell from $8.145 billion on 30 June 2021 to $7.6433 billion on 31 March 2022 before rising to $8.144 billion on 30 June 2022.
Similarly, Starbucks’ quarterly gross profits fell from $1.903 billion on 30 June 2021 to $1.7 billion on 30 June 2022. Meanwhile, the quarterly income fell from $1.489 billion on 30 June 2021 to $1.296 billion on 30 June 2022.
Dramatically, Starbucks’ revenue growth fell from 77.57% in the quarter that ended on 30 June 2021 to $8.63% in the quarter ending on 30 June 2022. Hence, Starbucks could face collapse.
Starbucks (NASDAQ: SBUX) is a growing company despite the fluctuating revenues.
Strangely, Starbucks even grew during the COVID-19 pandemic. For example, the number of company-owned US Starbucks stores grew from 8,791 in 2019 to 8,947 in 2021, Statista estimates. Similarly, the number of licensed US Starbucks stores grew from 6,250 in 2019 to 6,497 in 2021. Thus, the total number of US Starbucks grew from 15,041 in 2019 to 15,444 in 2022.
Conversely, Starbucks’ total assets fell from $29.477 billion on 30 June 2021 to $28.156 billion on 30 June 2022. In comparison, Starbucks’ cash and short-term investments fell from $4.907 billion on 30 June 2021 to $3.254 billion on 30 June 2022.
Therefore, Starbucks is losing value and making less money as its footprint grows. Predictably, Starbucks’ debt is growing. The total debt grew from $23.524 billion on 30 June 2021 to $23.899 billion on 30 June 2022.
Starbucks finished the last fiscal year with less value and less cash, but more debt. That does not sound healthy to me.
The Starbucks Corporation (SBUX) is generating less cash. For example, Starbucks’ quarterly operating cash flow fell from $2.102 billion on 30 June 2021 to $1.7 billion on 30 June 2022.
Moreover, Starbucks’ quarterly ending cash flow fell from $872 million on 30 June 2021 to -$735.9 million on 30 June 2022. Thus, Starbucks is burning more cash than it generates.
Comparatively, Starbucks is paying off more debts. For example, the quarterly financing cash flow grew from -$941 million on 30 June 2021 to -$1.8 billion on 30 June 2022. Notably, Starbucks reported a quarterly financing flow of -$4.333 billion on 30 September 2021.
Therefore, Starbucks has to pay enormous amounts of debt. Yet it is generating enormous amounts of cash.
I think inflation could be the greatest threat to Starbucks (SBUX). To explain, when inflation rises, people have less money to spend on small luxuries such as lattes.
Notably, the US inflation rate rose from 5.39% in September 2021 to 8.26% in September 2022. Hence, over inflation rose by 2.87% in a year.
A greater threat to Starbucks is food inflation. The US food inflation rate rose from 4.6% in September 2021 to 11.4% in August 2022. Hence, US food inflation grew by 6.8% in a year. Thus, groceries cost more, which gives ordinary people less money to spend on lattes and iced teas.
The greatest threat is the US energy inflation rate. Trading Economics reports the US energy inflation rate has been over 20% for 11 months. For example, the US energy inflation rate rose from 24.827% in September 2021 to 41.624% in June 2022 and fell to 23.813% in August 2022.
Consequently, drivers have less money to spend at the Starbucks drive-thru. Instead, the drivers spend all their extra cash at the filling station.
I think Starbucks could lose money and close stores if inflation keeps rising.
Starbucks’ (SBUX) stock has a few attractive features. For example, Starbucks has scheduled six 49₵ quarterly dividends 26 November 2022 and 26 August 2024.
Overall, Starbucks shares offered a $1.96 forward dividend a 2.33% forward dividend yield on 23 September 2022. Thus, I consider Starbucks a good dividend stock, but not a growth or value investment. Yes, Starbucks’ share price is falling, but so is its moneymaking capacity.
I predict, Starbucks will have to stop expanding and begin closing stores if inflation gets worse. My advice, buy Starbucks for the dividend but don’t expect any growth for a long time.
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Center for Individualism
Daniel G. Jennings
The Random Walk
Daniel G. Jennings is a writer who lives and works in Colorado. He is a lifelong history buff who is fascinated by stocks, politics, and cryptocurrency.