Starbucks Is Still in Trouble, but Is It a Once-in-a-Decade Opportunity Right Now?

Company Performance - Starbucks has experienced a decline in stock performance, trading 22% off its peak price and producing a total return that has lost investors 5% over the past three years, compared to a 32% total return of the S&P 500 [1][2] - The company reported a same-store sales (SSS) decline of 7% globally in Q4 2024, marking the third consecutive quarter of year-over-year decreases, with significant drops in the U.S. and China [3][4] - Transaction counts have been falling, indicating weak foot traffic, attributed to high prices and long wait times [3] Competitive Landscape - The retail coffee industry is highly competitive and fragmented, with the five largest chains in the U.S. holding less than half the market share, leading to minimal switching costs for customers [4] Leadership Changes - Laxman Narasimhan served as CEO from April 2023 to August 2024 but failed to improve sales and profit trends, resulting in a decline in stock value during his tenure [5] - Brian Niccol, the new CEO appointed in September 2024, has a strong track record from his time at Chipotle, and his appointment led to a 20% increase in stock price, reflecting market optimism [6][7] Strategic Focus - Niccol's priorities include leveraging Starbucks' brand to regain customers, particularly in the U.S., speeding up order fulfillment, and enhancing employee tools [7] Valuation - Starbucks currently has a price-to-sales (P/S) ratio of 3.1, which is a 17% discount compared to the average of the past five years, indicating a potentially undervalued situation [8] Investment Outlook - The stock may represent a once-in-a-decade opportunity if Niccol can successfully turn the company around, but investors may want to wait for positive same-store sales growth before considering an investment [9]