Stock Starbucks: Sales of store, target is a turn nearby? | Motley fool

Starbucks (Sbux -2,52%) They reported their fiscal results in the third quarter and the global sales in the same store again failed. It was the sixth equal quarter, when the company was a comparable decline in sales in stores.

However, it is a measure to try to increase sales. This included the implementation of the green apron service model, which aims to create a composite, repeatable standard across its cafes. Starbucks said the stores that implemented this model have already improved transactions, dirty and customer services. In mid -August he plans to introduce a model for all USA stores.

He also began to remodel shops and upgrade his mobile system and a mobile order system to help improve the customer’s experience. They will also present cold FAM protein supplements for drinks, coconut water and new roast goods, all for customers to spend more in their shops.

All of this, however, has reached a large cost. Starbucks spends 150,000 dollars for a shop. However, its investment in additional work, which it stated next year will increase the annual costs of $ 500 million. High labor costs have already bitten from operating margins and profits. In the fourth quarter, the modified operating margins closed by 660 basis points to 10.1%, as operating expenses in the store climbed to 13.5% year -on -year and accused 45.9% of the sale compared to 42% a year.

This was necessary to solve Starbucks problems, but it could also change its profitability profit. The company said it is working on reducing costs throughout the business to help balance the additional cost of work. CEO Brian Niccol said he did not think that the company had already earned earlier, and that 2019 serves as a good travel map where they can return operating margins. In the end, however, he wants to exceed preliminary operating margins.

In the same store dirty negative

Global sales in the same Starbucks store dropped by 2%. Global operation dropped by 2% while there was a 1% increase in average tickets. In North America, comparable sales in stores decreased by 2%, with the operation decreased by 3%. International sales from the same trade were flat, with the operation increasing by 1% and changing average tickets by 1%.

Starbucks, China’s second largest market, has seen an increase in sales of the same trade by 2%, with an average ticket and 6% increased traffic. The company is currently looking for a strategic partner to associate with its Chinese enterprise, although it said that it wants to maintain a meaningful share and that it will only have an agreement if one makes sense.

Total revenues increased by 4% to $ 9.5 billion, as it continues to add new stores, but a modified share profit (EPS) dropped by 46% to $ 0.50. The income number was $ 8.82 billion before analysts’ estimates LsegBut EPS missed a consensus of $ 0.65.

Is Starbucks a purchase?

Niccol took a hard but necessary step to hire more barists and improve the experience of guests in Starbucks. Although there has been a huge rise in the sale of the same trade, there are early grades that things are improving.

This means that the costs of these changes are obvious and have considerably compressed operating margins and suunk profitability. Increased sales of the same trade should help improve the operating lever effect by expanding the cost to a larger income base, but the company also plans to continue adding many labor costs. Whether it can restore its operating margins will lead a long way to determine where the shares will head in the next few years.

In terms of valuation, Starbucks is not cheap, trading in the ratio of pricing to earnings (P/E) is approximately 32 based on analysts for fiscal 2026 (which ends in September 2026). I think the turnover is in works and advancing. But due to the cost of turnover and valuation of shares, it prefers to stay on the sidelines.

Geoffrey Seiler has no position in the actions. Motley Beble has positions and recommends Starbucks. Motley fool has a publication of politics.