Starbucks Erases 2021 Gain as Shares Slump on Cost Concerns
(Bloomberg) -- Starbucks Corp. tumbled the most in more than a year on concerns that stubbornly rising costs will challenge the coffee giant in the coming months.
Shares of the Seattle-based company dropped as much as 8.1% Friday, the biggest decline intraday since June 11, 2020. The move erased this year’s gain, leaving it down about 1.2% in 2021.
Starbucks’ sales in its latest quarter, released late Thursday, fell short of analysts’ expectations. It also projects operating margin of 17% for the fiscal year that began in October -- below the longer-term range the company has set of 18% to 19%.
While the company has bounced back quickly from the pandemic, it “now grapples with significant inflationary pressures and investments that are weighing on the margin outlook,” said Stifel analyst Christopher O’Cull in a research note. He said the company will struggle to raise prices enough to offset inflation and trimmed his earnings projections for fiscal 2022 and 2023.
The company also will face a union vote at several locations in the Buffalo, New York, area after the U.S. labor board rejected its bid to prevent store-by-store unionization votes. Starbucks had argued that because of similarities among its stores, any vote on unionization should include staff at all 20 of its Buffalo-area locations, which would have meant the union would need backing from a majority of voters across the region in order to win.
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