Shares of Starbucks have been underperforming the S&P 500 in 2017 due to scaled-back growth projections. However, according to Tigress Financial Partners’ Ivan Feinseth, there are several reasons why Starbucks has more to offer investors:
Core Focus on Specialty Coffee
Feinseth praises Starbucks’ strategic decisions to sell Tazo Tea to Unilever and close down Teavana stores. These moves allow the company to concentrate on its core mission of selling specialty coffee drinks and complementary food. By leveraging an innovative digital customer service and supply chain platform, Starbucks aims to enhance the overall experience for its customers.
New Product Offerings
The introduction of new and updated products can drive sales with higher margins and attract more customers throughout the day. Potential offerings include specialty coffees, nondairy options, a wider selection of juices, expanded food choices, and even the possibility of making alcohol more widely available. Feinseth suggests that capitalizing on these opportunities can lead to significant growth and increased profitability.
Digital Technology for Customer Engagement
Starbucks utilizes digital technology to deepen customer relationships and improve the ordering process. The company’s loyalty programs, such as My Starbucks Rewards, have shown growth. By driving more customers to their mobile app for purchases, Starbucks is able to enhance convenience and reduce wait times.
To attract new customers, Starbucks is focusing on expanding its presence overseas, particularly in Asia. Feinseth emphasizes that Asia, specifically China, will be a significant source of growth for the company over the next five years. This expansion not only drives store traffic but also boosts sales of Starbucks’ branded products.
In conclusion, Feinseth believes that Starbucks shares offer substantial upside potential from their current levels. With a renewed focus on its core business, innovative digital strategies, new product offerings, and strategic international expansion, Starbucks is poised for growth and increased profitability.