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SBUX – Market expectations are for Uniform ROA to reach new peaks, but management may have concerns about revenues, margins, and growth in China

March 18, 2021

  • Starbucks Corporation (SBUX:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a 44.1x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, but management may have concerns about maintaining revenue growth, operating margins, and new stores in China
  • Specifically, management may lack confidence in their ability to sustain comparable same store revenue improvements, maintain record sales performance from their Double 11 campaign, and drive top-line growth in China. In addition, they may lack confidence in their ability to sustain their margin outperformance in both their Americas and International segments, execute their trade area transformation initiatives, and continue the acceleration of new stores in China. Furthermore, they may be overstating the firm’s resilience, the sustainability of their wage and benefits increases, and their ability to meet EPS guidance