"Starbucks' Investment Appeal Revealed at Investor Day"

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] Starbucks, which had been adjusted by more than 20% this year, is expected to show an upward trend thanks to its mid- to long-term growth strategy.

On the 18th, Starbucks stock price stood at $91.31. Although it has fallen more than 21% on an annual basis, it recorded a rise of over 2% in the past week after announcing its mid- to long-term growth strategy at Investor Day.

Before Investor Day, investor sentiment toward Starbucks was not very positive due to concerns about growth reaching its limit, the impact of China's lockdown, Howard Schultz's temporary return and urgent strategy changes, and union issues. The Q3 earnings announced last month showed a gradual recovery in the Chinese market, and it is expected that investment funds, after the suspension of share buybacks, will be directed toward workforce expansion and new store equipment, easing some of the concerns.

Researcher Sim Ji-hyun of Shinhan Financial Investment explained, “The still unclear details have acted as downward pressure on the stock price for a month,” adding, “Concerns about the economy and consumer recession continue to grow across consumer goods, making a new growth strategy necessary.”

At Investor Day, Starbucks' new CEO Laxman Narasimhan announced an unprecedented innovation plan, declaring the start of a new era. The main financial targets include an annual revenue growth rate of 10-12% over the next three years. By region, the U.S. is expected to grow 7-9%, and China is assumed to recover to 4-6% growth in 2025 as the impact of COVID-19 eases. The dividend payout ratio is set at 50%, with a dividend yield of 2%, which is better than the past three-year average dividend yield of 1.76%. Additionally, share buybacks are planned to resume from 2024.

The global store count is projected to grow at an average annual rate of 7% over the next three years. From 34,948 stores in the first half of this year, it is expected to increase to 45,000 by 2025. This aligns with the guidance given at the 2020 Investor Day to reach 55,000 global stores by 2030. Currently, there are about 16,000 stores in the U.S., with plans to expand to 18,000 by 2025. Various store formats such as company-operated, licensed, delivery, pickup, and drive-thru will be applied according to purpose, with an expected annual store growth rate of 3-4% compared to the previous year.

Company-operated stores in China will aggressively expand from the current 6,000 to about 9,000 stores across 300 cities by 2025. This represents a net increase of 50% over three years, with a new store opening approximately every 9 hours. Researcher Hwang Sun-myung of Samsung Securities said, “Despite the COVID crisis impacting the China division, the determination to prepare for a mid- to long-term leap has been confirmed,” adding, “The forecast that China’s premium coffee market will grow at an average annual rate of 23% over the next three years, compared to 11% over the past three years, supports this.” Currently, the registered membership of company-operated stores in China is 85 million, which is higher than the 27 million in the U.S.

Researcher Sim Ji-hyun said, “The concretized long-term strategy this time focuses on investing in workforce expansion, new store openings, and the introduction of technology and equipment to create new demand,” adding, “Considering that the causes suppressing the stock price have been somewhat resolved, the investment attractiveness has increased.”

This content was produced with the assistance of AI translation services.