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Starbucks’ Stock Is Struggling As Competition Heats Up In The US And Abroad

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Starbucks' Stock Is Struggling As Competition Heats Up In The US And Abroad

(CTN News) – Amidst increasing global competition, Starbucks (SBUX) is attempting to find its footing.

In addition to a decline in occasional visits to the company’s stores in the United States, cautious consumers in China, and increased investment from big and small companies in coffee, shares of the company are struggling.

In an internal memo, CEO Laxman Narasimhan expressed his concerns about misinformation being spread about the company due to the ongoing Middle East conflict.

Over the past year, Starbucks shares have declined by 5%, while the S&P 500 of companies (ASX:GSPC) has gained approximately 9%.

Despite the company’s uphill climb, Deutsche Bank analyst Lauren Silberman told Yahoo Finance that the worst may be over for the stock. According to Silberman, “we see limited downside and believe the risk and reward are skewed to the upside” moving forward.

According to Silberman, Starbucks can turn things around with innovation in its products, particularly those geared towards Gen Z and millennial consumers.

In this fiscal year, three new flavors of beverage will be introduced, including the company’s first flavor, lavender, on March 7.

As Silberman noted, some of Starbucks’ early Instagram posts introducing lavender drew some of the best engagement he has seen on Starbucks posts for quite some time. Among the younger generation, lavender is regarded as a growing trend.

According to TD Cowen analyst Andrew Charles, Starbucks is focusing more of its marketing budget on social media in order to reach Gen Zers and millennials, who constitute approximately 51% of its customer base in the US. Its advertising expenses worldwide amounted to $508 million last year.

In Charles’ words, the company is exploring the possibility of offering energy beverages as a way to attract young drinkers and afternoon visitors as a means of expanding its audience.

However, management anticipates soft revenue growth in the second quarter of fiscal year 2017 of the company as it works to improve same-store sales in the US and China.


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