Tag Archives: $17/hr wage

STARBUCKS (SBUX) REPORTS DECEMBER QUARTER – A LOT YOU SHOULD KNOW!

STARBUCKS (SBUX) REPORTS DECEMBER QUARTER – A LOT YOU SHOULD KNOW!

Starbucks reported last evening results for their 1st (December) quarter, disappointing enough, especially in terms of guidance, that the stock sold off 5% in the aftermarket trading.

We’ve updated our concise Corporate Description, and that link is provided below. For those interested in all the details we have also provided a link to the transcript of their Conference Call last evening. Here and now we want our readers to be aware of their commentary regarding cost pressures, inflationary expectations, staff compensation requirements and pricing plans.

The single most dramatic statement, affecting every operator and investor in service industries is that Starbucks expects, by September of this year (their fourth quarter) to be providing AN AVERAGE STORE HOURLY WAGE OF SEVENTEEN DOLLARS. Competitors for retail crew will obviously have to compete with that, and Starbucks has long additionally provided  excellent fringe benefits within an outstanding operational culture.

The Omicron variant resulted in higher than anticipated costs in the December quarter, both in terms of store staffing (hiring, training and retention) and supply chain distortions. While some of this has abated during January, the expectation is that these elements will continue to be a factor in the balance of ’22.  These costs are expected to affect operating margins by about 200 basis points, part of which will be recouped by pricing actions and operating efficiencies. SBUX management commentary is no doubt typical of  many product and service providers, who were hopeful that the obvious inflation would prove to be “transitory”, held back on price adjustments, but no longer. “Overall our inflationary pressures in FY2022 will remain elevated relative to FY2021”.

An interesting side note is that Starbucks, through a Partnership with Pepsico, is entering the energy category with Starbucks BAYA energy drink, no doubt looking over their shoulder at Dutch Bros (BROS).

Our readers can fill in the details from the public releases and the Conference Call transcript link provided below. There is no reason to write off this still great company, but 2022 will be a lost year in  terms of earnings progress and that could prove to be typical of many other service companies.

CORPORATE DESCRIPTION

https://www.liptonfinancialservices.com/2021/11/starbucks-updated-write-up/

CONFERENCE CALL TRANSCRIPT

https://seekingalpha.com/article/4483367-starbucks-sbux-ceo-kevin-johnson-on-q1-2022-results-earnings-call-transcript