Starbucks is a chain of coffee shops and everybody likes the taste of the different flavours of coffees and drinks that they offer. Plus they offer lots of delicacies too. But are they losing revenue? What is happening to them? Are people losing interest in them? You can find all the details about this here.
In the 1990s Starbucks was in the third position as a place where people from offices, and different communities come together to enjoy the comfort and ease of the place. This notion was the idea of the long-time CEO of the company Howard Schultz. Their ethos is offering “a welcoming and uplifting third place” and over the years they provided great employee policies like healthcare and part-time benefits. It is a purposefully exclusive workplace too. Because of this, it became one of the largest restaurant chains after Subway and McDonald’s. But due to the Covid pandemic, like many restaurants, Starbucks also staggered in their business. What happened? And why did the stocks fall?
Where do most of Starbucks’ revenues come from?
Starbucks sells its delicious beverages and coffees in its chain of restaurants and stores. It derives its revenues through it. But most of its sales are through its beverages. Its 2019 revenue was 15.92 billion USD. The next popular thing on their menu is pastries & confections which make up 18% of the total revenue. Plus it also serves packages of teas and coffees to many food businesses.
What does Starbucks say about its situation?
Starbucks has shared that it lost $3 billion in revenue because of the Covid 19 pandemic. It happened in its fiscal third quarter. It is also predicting a decline in sales in China and US stores for the full fiscal year. Plus, the shares of the company are also falling. The stock with a market value of $92.6 billion also has fallen 10% this year.
So because of this Starbucks is expecting a net loss per share of 64 cents to 79 cents. But by the end of June, the company is expecting the cash flow to be positive. The forecast for the same sales growth is looking a little doubtful.
The CEO of Starbucks Kevin Johnson and CFO Pat Grismer wrote a letter to the stakeholders “The Starbucks brand is resilient, customer affinity is strong and we believe the most difficult period is now behind us”.
The same stores in the US tumbled 43% in May when the company opened again in these locations. They had modified hours and operations in the time. Then by the end of the month, 91% of U.S. stores were opened again.
In China, the same store sales reduced by 21% in May but in April there was a decline of 32%. 90% of the Chinese cafes are open again now after the pandemic and 70% have full seats. Then over 57 net new stores are in China.
New store openings have also started in the Americas. The shop has started 300 net new locations in the fiscal. The company is planning to close 400 company-owned cafes in the next eighteen months to make some changes to the existing stores. More and more customers are ordering through the Starbucks app so the company is planning to modify its cafes. But the pandemic delayed that plan. Now they are starting to execute it again.
Starbucks is planning to add more pickup stores in dense urban markets such as New York, Chicago and San Francisco. The first mobile pickup location was started in November in Manhattan’s Penn Plaza. The suburban cafes will serve as a place where people can pick up and get their orders through walk-up windows, curbside pick-up for mobile orders and drive-thrus.
The chain of coffee restaurants is also renovating some of the cafes by building separate counters for mobile order pick-up. Plus many delivery couriers will also be available in the busy locations.
It is amending its fixed charges coverage ratio of credit agreement for $3 billion. They are also changing the line of credit with the fourth quarter of fiscal 2021. As of Wednesday, there has not been any line of credit tapped.
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What problems are Starbucks facing?
1. Staff shortages
The staffing shortages are happening all over the world in Starbucks and it is cutting the store hours down. The store is facing the effects of this change. They have recently shared about how their service will be disrupted because of the change. Customers can expect short store hours so it is increasing the need for them to order online.
But customer complaints are also increasing day by day. According to the sources, a store in the Ohio location closed for two full days and then it became a drive-thru. It closed off its dining rooms so there is no seating availability.
2. Ingredients missing
There is also a shortage of some of the favourite ingredients on the Starbucks menu. Until further notice, this shortage will last. There was no oat milk and flavoured syrups during the spring and the supply chain led to havoc on the menu. Many popular items were put on hold because of this shortage like the frappuccino mix and breakfast sandwiches which are a classic of the company.
3. The chaos of mobile orders
The mobile orders started to take off during the pandemic when things got difficult but it was even challenging for the overworked baristas. The digital orders permitted lots of orders to come at once so it became hard to cater for all. It was not easy to handle all the orders at the same time.
The mobile app also posed some problems for the customers. The app had a glitch and did not show what items were available in the stores. Sometimes the key ingredients were substituted with undesirable ingredients.
4. New Covid 9 policies
Starbucks demanded its workers be fully vaccinated. The workers were also required to offer daily Covid tests. But it received backlash for dropping some of its policies that allows it to take care of the health of its customers and employees.
Conclusion
Starbucks is one of the best coffee places there. But like all businesses, it is facing troubles because of unexpected situations and sudden decisions.
Also read: How Do You Make Coffee Using A French Press?
