Starbucks Q3 Earnings: Can China's Recovery Perk Up a Lagging Stock?
Investors will watch whether price/mix can offset declining traffic. Global comps have declined for five straight quarters, pulled down by a 4% drop in U.S. traffic and a 4% slide in average ticket in China. Beyond top-line figures, profitability and operating margins will be under the microscope, as the company's investments in labor and CEO Brian Niccol's Back to Starbucks strategy are expected to weigh on short-term earnings. Any updates on the strategic direction of its China business, including potential partnerships or sales, will also be of significant interest given the competitive pressures in that market.
With the stock trading at 30 forward earnings, even a routine beat may disappoint if management cannot show visible traction on Niccol's traffic recovery and cost-saving checkpoints.
This article first appeared on GuruFocus.
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