Subtitles section Play video Print subtitles - Betting against Starbucks has been a mistake for a long, long time. But finally, the concerns are crystallizing. This past quarter, Starbucks sales fell off of a cliff. This is "Heard on the Street," and today we're talking about Starbucks. (bouncy piano music) The suspicion is people are finally hitting a pain point with the expensive beverages at Starbucks. This is the change in US foot traffic. You can see that Dunkin' grew quite a bit faster, and Dutch Bros, which is a fast expanding chain, grew far more quickly. The overall growth in Starbucks in the United States has slowed dramatically, because they've reached a saturation point. It's growing, but it's not growing like it used to grow. They need China to succeed. So Starbucks' long-term strategy in China is to grow very quickly, because they know that the country's becoming more wealthy, and that people like coffee culture. Starbucks said in 2022, it wanted over the next three years to open a cafe in China every nine hours, which sounds bonkers, and it is, except if you consider the fact that in China last year, a brand new coffee shop opened, on average, every 20 to 30 minutes. The problem is, Starbucks has a lot of competitors in China, all of a sudden, led by Luckin Coffee, which is the local champion. How quickly is Luckin growing? Well, here's a chart where you see Luckin in blue, and Starbucks in green, and you can see they were pretty neck and neck, which is problem enough for Starbucks. And then in 2023, Luckin went into total turbo overdrive in terms of new store expansion. China is not over for Starbucks, but the growth story might be significantly diminished. For a stock like this, growth is really the most important thing. In order for investors to pay growth stock prices for it, they need to expect it to continue growing quickly. May was a wake up call for them where they saw that the two primary growth engines, the willingness of Americans to pay more and more for coffee, and the willingness of Chinese people to keep sampling this beverage, and for them to dominate this new market, have both disappointed. And if they don't fix one, and preferably both, it won't be the growth stock that it once was. Just treading water, muddling along is not going to be enough for investors in the stock. (bouncy piano music)
B1 china growth stock piano music growing bouncy Starbucks Is Losing Momentum in the U.S., Can It Succeed in China? | WSJ News 1348 24 林宜悉 posted on 2024/04/27 More Share Save Report Video vocabulary