The Pumpkin Spice King’s $450M “Reinvention Plan” is Producing Results – The Average Joe

    The Pumpkin Spice King’s $450M “Reinvention Plan” is Producing Results

    Victor Lei — Head of Research

    November 2, 2023

    November 2, 2023

    It’s getting colder and the leaves are turning, which means only one thing: the Pumpkin Spice Latte is back and churning out profits. But its inventor has been caught in the middle of a war between its investors (who wanted more growth) and employees (who wanted better compensation.)

    The coffee giant offered an olive branch… In the form of a $450M reinvention plan to appease employees, maximize profits and grow the company’s sales. A year later, these efforts are coming along well under the company’s new CEO, Laxman Narashiman, who likened the effort to “refounding” the company.

    • The company designed new workstations and tools and purchased new equipment to make stores more efficient — boosting the company’s margin to 18.2% from 14.2% the year before.
    • With threats of workers unionizing, Starbucks also “created a more stable environment” by giving more hours per worker — sending pay up 20% since last year.

    Investors ordered a Grande, Starbucks delivered a Venti

    Investors tipped $SBUX with a 9.5% rise yesterday, its best day in over a year. Analysts were happy all around — as its latest quarter same-store sales jumped 8%, surpassing the 6.3% analyst average.

    • On the earnings call, the CEO highlighted Starbucks’ “remarkable fall launch that led to record-breaking average weekly sales,” with 816 new stores domestically.
    • Iced drinks make up 75% of their US sales as the company installed improved ice machines to shorten service times.

    Like many others, Starbucks warned growth could slow in the coming year over global uncertainty — but still expects earnings per share to rise 15-20% in FY2024 as operational efficiencies take shape.

    Where Starbucks missed: Growth in China, one of Starbucks’ most important markets, did not meet the anticipated pace as its economy continues to deal with the fallout of its struggling property sector. Still, Starbucks’ expansion efforts in China carried on with a record 326 stores added in the quarter — expecting to grow from 6.8K stores by the end of the year to 9K stores by 2025, at a clip of ~1K new stores per year.

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