Starbucks' (SBUX) "Back to Starbucks" strategy should help improve US transactions and sales over time, though the company continues to face near-term traffic and sales pressure, UBS Securities said.
A recent UBS consumer survey showed that while Starbucks maintains strong scores on brand attributes, including trust, service, innovation, and rewards, value perception has declined, which, combined with increased coffee competition, has weighed on traffic.
According to the survey, 71% of respondents cited affordability as a reason for reduced visit intent, and 25% said they preferred other brands. Key drivers that could increase visits include greater menu variety, improved convenience, and better value, the brokerage said in a note Friday.
"Despite potential near-term choppiness, we believe [Starbucks'] turnaround plans should support a sales recovery over time, given CEO Niccol's track record and implementation of strategic initiatives across operations, marketing, product and customer experience," the firm said.
Still, UBS expects any meaningful sales inflection to take time, with macroeconomic pressures and ongoing investments likely to weigh on margins and earnings in the near to medium term.
The firm reiterated its neutral rating on the stock and raised its price target by $5 to $95.
Price: 93.40, Change: +0.14, Percent Change: +0.15
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.