Following months of tail spinning revenue amid the coronavirus pandemic, Starbucks released a plan Wednesday to shift in the digital direction, offering more take-out options and investing in its digital platform.
A Rough Year For Starbucks
Starbucks has faced huge challenges in the last few months as the coronavirus pandemic besieged the world. The company just announced that widespread closures have caused some store sales to dive over 40%. This translates to an estimated $3.2 billion loss in revenue in its third fiscal quarter.
In March, when the first cases of COVID-19 started erupting in the U.S., Starbucks was forced to cease dine-in services. The coffee giant has since been able to reopen about 95% of its American locations, though in-store operations are still strictly limited. Most stores are bound by limited hours and in-store capacity, while others still prohibit any entrance by guests, exclusively offering drive-thru service. Moreover, storefronts remain closed in dense cities like New York, which became an epicenter of the pandemic.
Despite its partial reopening, Wednesday’s bleak announcement caused Starbucks stock to fall around 4.5%. Year-to-date, shares are down 12%, compared to the 1.6% of the S&P 500.
Starbucks had long hoped to expand its on-the-go model, and in light of recent events, it recognizes that takeout-only business might be the only way to keep stores running. Given the dramatic shift in consumption culture wrought by the pandemic, Starbucks is moving full-steam ahead to bolster digital and drive-thru infrastructure.
The company will be investing in creating more drive-thru locations, pick-up only locations, and delivery services. According to Wednesday’s statement, up to 400 stores in the U.S. and Canada will either close, renovate, or move by the end of 2021. (You might want to check on your go-to study spot to see if it’s about to move!)
This shift reflects the larger trend in the retail and food industry toward convenience-focused platforms. The pandemic has changed the standard for how customers obtain their goods.
But not long ago, Starbucks had invested in making franchised locations look and feel like cozy, local cafés. Recent changes in decor to include armchairs and ceramic mugs for sit-in customers could suggest that they won’t be ditching the traditional café model just yet.
Though stocks are down today, investors are feeling quite positive about Starbucks’ future. According to Bloomberg, around 40% of Wall Street analysts consider Starbucks a “buy,” while 57% of analysts are calling it a “hold,” meaning the consensus is that Starbucks still has a lot of value as an investment.
The main reason for such sustained confidence is that the Starbucks brand continues to be priceless. The green, white, and black logos are nearly ubiquitous in town squares and Instagram photos alike. And as Starbucks embraces the inevitable changes in consumers brought on by a history-shifting pandemic, investors feel confident that it will evolve with the times.