Brian Niccol may have just sunk his foot in his mouth for coffee giant Starbucks (SBUX), after declaring the coffeehouse a “premium experience,” as measured by the fact that the average spend therein is $9. Outside observers did not take this news well, and backlash was swift. Investors made their own feelings clear and sent Starbucks shares down fractionally in Monday afternoon’s trading.
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Brian Niccol joined the Wall Street Journal for its What News podcast, and delivered some very concerning details. While the current economic climate might be best described as “inhospitable” for a lot of people, Niccol seemed convinced that Starbucks could quietly weather the storm. He noted, “What we’re seeing is people, they want to have a special experience. And regardless of what your income level is, in some cases, a $9 experience does feel like you’re splurging. And then what that means is we have to make it worthwhile. And then in other cases, people believe, ‘Well, this is a really affordable premium experience,’ because they’re saying like, ‘Well, it’s less than $10 and I get a really premium experience.’”
The backlash, as noted previously, was brisk. One comment noted, “I gotta stop going to Starbucks.” Others were a bit more specific though no less brutal, calling Niccol “disconnected.” One asked “How out of touch could a person possibly be….” With 66% of adults calling themselves “very concerned” about the cost of food and consumer goods in a recent study, this was likely not the best time for Niccol to advance the notion that Starbucks is a premium product.
You Too Can Get a Metal Card
Then Starbucks may have cemented its status as the new Marie Antoinette of businesses by offering its top-tier Reserve club members a special incentive: a metal card. The Reserve members—there are Green, Gold, and Reserve tiers—now get a physical Reserve Card that has been personalized for its user.
Interestingly, the physical card does nothing that the app itself does not already do. Users can load money onto both of them, use either when an order is placed, and earn Stars accordingly. The card comes with no other benefits than its mere existence. This may be Starbucks’ attempt to convince users that it truly is a premium experience.
Is Starbucks Stock a Good Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on SBUX stock based on 15 Buys, 12 Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 29.68% rally in its share price over the past year, the average SBUX price target of $107.72 per share implies 2.31% upside potential.
