Starbucks Faces Pricing Challenges Amid Turnaround Efforts
Recent data from JPMorgan highlights Starbucks' (SBUX) ongoing perception issue regarding the cost of its coffee.
In New York City, Dunkin' Donuts and in Kansas City, Dutch Bros. offer lower prices for similar beverages. JPMorgan analyst John Ivankoe suggests revisiting Starbucks' pricing architecture despite the brand's improved in-store experience.
Starbucks' recent earnings report shows a global same-store sales decline of 4%, attributed to reduced discounts and long lines. North America and US same-store sales also fell by 4%. International sales faced similar challenges, particularly in China, where sales dropped by 6% year-over-year.
CEO Brian Niccol acknowledges the turnaround challenges and is focused on enhancing mobile ordering and payment processes. However, guidance for the current fiscal year has been withdrawn to accommodate investments in marketing, staffing, and in-store experience.
Analysts, including Citi's Jon Tower, believe Niccol's initiatives will positively impact value perception and margins while maintaining Starbucks' premium positioning. Tower anticipates further price perception improvements as Niccol plans to explore pricing revisions for customization options like cold foams and syrup pumps.
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