Someone once said that the best way to predict the future is to create it, and Wall Street investors are stoked as they watch Starbucks Corp. (SBUX) creating before their eyes what should be an exceptional 2022.
Several moves taken recently by the 50-year-old Seattle, Washington-based coffee chain are providing a clear picture for Wall Street analysts about where the company, and hence its stock, will likely be be going over the next 12 months. Among the most promising updates are new menu items, higher dividends and salary increases.
New menu items
On Wednesday, Starbucks said it is testing its own version of boba-style iced coffee. According to businessinsider.com, the chain confirmed that it was carrying out a limited test of two beverages "made with coffee pearls" at two stores this winter.
The spokesperson declined to share further details, but a viral TikTok video posted by @kirbyssister shows a sign at a Starbucks store telling customers to "try our new coffee popping pearls." The sign listed two new drinks containing the product. The "Iced Chai Tea Latte with Coffe Pearls" cost $5.45, while "In the Dark," an iced drink which the TikTok user said was based on Starbucks' Cold Brew, cost $5.25.
Earlier this month, management announced the addition of new Starbucks Zero Creamers, which have 0g added sugar per serving. They are available in two flavors - caramel and hazelnut.
Dividends
Starbucks recently declared a quarterly cash dividend of $0.49 per share of outstanding common stock that will be payable to investors on Feb. 25, 2022. Sharesholders must be on record as of Feb. 11 to receive the distribution.
A dividend raise is always welcome news among shareholders, as it means the company is comitted to shareholder returns. Unlike buybacks, dividends are rarely made to cover up excessive levels of new share issuance.
Salaries
In December, top brass announced a “significant investment in wage to recognize and reward tenured partners while also increasing pay floor,” the company said. Hourly employees in the U.S. will average nearly $17 per hour, with a new range of $15 to $23 for baristas by the summer of 2022.
In a tight labor market, companies are increasingly realizing the importance of hiring and retaining good workers. Failure to pay a competitive wage in this environment will only result in high turnover, staff shortages and lost profits. Increasing the wages by this much is peanuts for a profitable company; those that are unable to raise wages in line with inflation are doomed to become obsolete.
Starbucks Foundation
Over the next few months, executives at Starbucks will disperse $1 million to a trio of nonprofits through its Starbucks Foundation: $500,000 will go to World Central Kitchen; $300,000 will go to Big Brothers Big Sisters; and $200,000 will go to Direct Relief, which equips health professionals in resource-poor communities to meet the challenges of diagnosing, treating and caring for people in need.
New Year's outlook
Stock analysts may well see in these early moves signs that 2022 may be better than 2021 for Starbucks. Global comparable store sales increased 20% in 2021, primarily driven by a 10% increase in average ticket and a 9% increase in comparable transactions. North America comparable store sales increased 22% for the year, primarily driven by a 13% increase in average ticket and a 7% increase in comparable transactions. U.S. comparable store sales increased 21%, driven by a 13% increase in average ticket and an 8% increase in comparable transactions. International comparable store sales were up 16%, driven by a 14% increase in comparable transactions and a 1% increase in average ticket. The company also recorded consolidated net revenues of $29.1 billion, which increased 24% (21% on a 52-week basis) from the prior year.
Rachel Ruggeri, Starbucks’ Chief Financial Officer, said in a statement: “We are thrilled with what we accomplished in fiscal 2021, far surpassing the pre-pandemic performance levels to deliver record-high revenue, operating income and EPS, even as global consumer mobility remains suppressed and inflationary headwinds pressured our business.”
