Starbucks is facing multiple challenges in major markets both internationally and in the U.S., making shareholders like us wonder if it’s a good idea to sell shares before the company’s next earnings report, which is expected in late January. “Starbucks is what I call a tough own right now,” Jim Cramer said Tuesday during the Club’s December Monthly Meeting . He highlighted concerns that China may be slowing and that the company may be losing share there to Chinese competitors such as Luckin Coffee and other smaller outfits. Luckin is known to use effective pricing strategies that appeal to cost-conscious consumers, but Starbucks still dominates China’s premium coffee segment. At a consumer conference earlier this month, Starbucks CEO Laxman Narasimhan admitted the recovery in China, the company’s second-largest market behind the U.S., is lagging. Narasimhan, who took the reigns from three-time CEO Howard Schultz in March, signaled that growth there is not coming back as fast as anticipated. This initially came as a surprise since Starbucks last month delivered solid China sales during its fiscal 2023 fourth quarter . The quarterly results initially breathed some life into the stock. But shares soon found themselves lower than where they closed after the company’s Nov. 2 quarterly results and promising updates concerning its Reinvention plan. From Nov. 17 to Dec. 5, Starbucks went on a 12-session losing streak rooted in China concerns that knocked nearly 11% off the stock. During Tuesday’s meeting, Jim also cautioned about headwinds for Starbucks at home, including protests accusing the company of taking sides in the Israel-Hamas war. Starbucks is pursuing legal action against its union, Starbucks Workers United, over to a social media post supporting Palestinians after the October Hamas terrorist attack on Israel. The coffee giant claims the union’s use of the Starbucks name has led some customers to express anger toward workers. Protests — some violent — have been documented in recent social media posts. In a letter to employees released Tuesday, Narasimhan condemned the violence happening around the world. “Many of our stores have experienced incidents of vandalism. We see protestors influenced by misrepresentation on social media of what we stand for.” The CEO also said: “Our stance is clear. We stand for humanity.” Earlier this month, Starbucks said it wants to restart talks in January with the union representing its baristas who want better pay and benefits. Hundreds of workers walked off the job in November during Starbucks’ annual Red Cup Day, which promotes its holiday beverages. They demanded improved working conditions and better scheduling. Starbucks later in the month announced plans to increase pay for certain tenured U.S. hourly retail employees, effective Jan. 1, 2024. Eligible employees working at retail locations for two to five years will get at least a 4% raise. Those more than five years in will get at least a 5% increase. Starbucks said some of the perks will be different for union workers. It’s possible the protests and the union strife have had a meaningful impact on Starbucks’ U.S. sales. Data from Bloomberg shows there was a slowdown in sales this fall from low teens on a percentage basis in October to the high single digits in November. This deceleration coincides with the rough stretch the stock had last month. The same data shows a slight pickup in mid-December, indicating the worst may be behind Starbucks. During Tuesday’s meeting, Jim said he would continue monitoring the data to determine next steps for Starbucks’ stock. (Jim Cramer’s Charitable Trust is long SBUX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Former employees and supporters join unionized Starbucks employees as they carry signs in support of a strike, outside of a Starbucks store in Arlington, Virginia, on November 16, 2023.
Saul Loeb | Afp | Getty Images
Starbucks is facing multiple challenges in major markets both internationally and in the U.S., making shareholders like us wonder if it’s a good idea to sell shares before the company’s next earnings report, which is expected in late January.
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