/https://specials-images.forbesimg.com/imageserve/1225046301/0x0.jpg?cropX1=0&cropX2=4003&cropY1=216&cropY2=2468&w=1920&resize=1920,0&ssl=1 "Here’s How Starbucks Plans To Transform Stores For The Post-Coronavirus World")
TOPLINE
Despite potentially losing over $3 billion in revenue in the third quarter, Starbucks announced on Wednesday that it will increasingly shift toward a digital customer experience based on convenience with plans to transform many traditional cafes by adding more takeout options.
The coffee chain will increasingly shift to takeout, planning to open dozens of pickup-only stores.
Alex Burstow/Getty Images
KEY FACTS
Shares of Starbucks fell over 4.5% on Wednesday after the company said it expects to post a loss—with as much as $3.2 billion of lost revenue—in its fiscal third quarter due to the coronavirus pandemic.
“Adverse impacts” from the coronavirus crisis caused U.S. same store sales to plunge by over 40% in May, as the company began to reopen many of its locations with modified hours and operations.
Despite the sizable financial hit from temporarily shuttering many of its stores during the pandemic, Starbucks is now doubling down on efforts to convert its cafes to an “on-the-go” format as it offers more drive through, curbside pickup and delivery options.
The company had already planned to increase convenience-led formats in many of its stores, but is now accelerating that timeline due to the shifting retail landscape caused by coronavirus.
Over the next 18 months, the coffee chain plans to transform hundreds of stores with more to-go options, in addition to closing some traditional cafes and rolling out dozens of new pickup-only locations.
Up to 400 Starbucks cafes in the U.S. and Canada will be closed, renovated or moved in the next year and a half, the company said.
“We know that it will take time to fully recover and post positive comparable-store sales growth,” CEO Kevin Johnson said in a letter to employees, though he also said “the most difficult period is now behind us” as sales start to rebound.
Like many retailers, Starbucks wasn’t spared during the market’s coronavirus sell-off in March: The stock is down 12% so far in 2020, compared to the S&P 500’s drop of 1.6%.
Crucial quote
“With each passing week, we are seeing clear evidence of business recovery, with sequential improvements in comparable store sales performance,” CEO Kevin Johnson and CFO Pat Grismer said in a shareholder letter. “The Starbucks brand is resilient, customer affinity is strong and we believe the most difficult period is now behind us.”
News peg
Surprising fact
Some 40% of Wall Street analysts are bullish on the stock and assign it a “buy” rating, according to Bloomberg data. Around 57% give it a “hold” rating, while just one analyst gives it a “sell.”
According to Morningstar analyst R. J. Hottovy, “Starbucks meets the mobile platform and balance sheet investment criteria, and while some consumers may take a pass on Starbucks’ premium prices in the near term, we believe its brand intangible asset will withstand COVID-19-related disruptions.”
Key background
Starbucks closed dine-in service at its U.S. stores in March, but began restoring limited operations starting last month. Most stores are now serving customers with drive-through, delivery and pickup options. Some 95% of Starbucks’ U.S. stores have reopened with the majority of closed locations in New York City, a COVID-19 hotspot.
Further reading
Nasdaq Hits Record High As Amazon, Apple Shares Jump (Forbes)
S&P 500 Turns Positive, Fully Recovering Coronavirus Losses (Forbes)
Mass Protests Across The U.S. Have No Impact On Stocks, What Gives? (Forbes)
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