Starbucks makes a modest profit from selling coffee from shops. It faces a lot of competition, and is not growing. It bounced back from the pandemic, but as the public's disposable income is squeezed by much higher prices for essentials like travel and heating and basic foodstuffs, will it continue to want to spend £3 on a cup of indifferent takeaway coffee?
The other problem is labour. Starbucks has been very effective in discouraging any kind of unionization of its workforce, but as its workers see their fellow workers in unionized jobs get big pay increases, there will be strong pressure on $SBUX. The workers may not be successful in unionizing, but if labour costs start to track the breakout in inflation, the effect will be the same. Labour costs are sticky. Wages are not negotiated continuously, but only once a year. With inflation in many developed economies hitting the low teens by the end of 2022, can Starbucks resist wage increases of maybe 5%? With profits only 17% of 'cost of revenue', a 10% increase in labour costs is going to a knock a big hole in profits.
Its hard to see that $SBUX has any great technological or regulatory barriers to entry. It's hard to see their market share, or the total market for takeaway coffee going up very much. Why would you pay 25 times for the stock?
This article outlines a bull case. I remain unconvinced.. To be honest, I forgot how exposed the company is to China. To me, that's all part of the larger bear case.
Last updated: 2026-03-07 by automated standardization process