Starbucks Corp. shares soared 10.5%, on the path to an all-time high, in Friday trading after the coffee giant reported a 4% same-restaurant sales increase for the Americas and U.S. But Stifel analysts question whether the company can maintain that level of growth.
The FactSet guidance was for a same-restaurant sales increase of 2.9% in the Americas.
“Interestingly, the same-restaurant sales gain was driven by check growth as traffic was negative, and [as] management has indicated the check growth should moderate in fiscal 2019, we question whether the same-restaurant sales increase is sustainable,” Stifel analysts led by Chris O’ Cull wrote in a note.
Starbucks SBUX, +8.61% reported a 4% increase in average ticket, which drove a 3% global same-store sales gain. The ticket change was 5% in the Americas, but traffic was down 1%.
Stifel rates Starbucks shares at hold with a $58 price target.
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Other analysts were more upbeat, finding a number of reasons to be encouraged by the results.
At Wells Fargo, a turnaround in China’s same-restaurant sales was a positive worth highlighting, along with better a food menu and the loyalty program.
“In short, we think Starbucks’ long-term fundamentals – supported in large part by Starbucks’ best-in-class digital initiatives and commitment to innovation – remain strong,” analysts wrote.
Wells Fargo rates Starbucks shares outperform and raised its price target to $66 from $64.
“It appears that digital user growth has reaccelerated lately and we believe this will ultimately bolster U.S. traffic,” wrote RBC Capital Markets analysts in a note.
They also talk up the company’s in-store execution and beverage innovation in their note.
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RBC rates Starbucks shares outperform and raised its price target to $68 from $58.
On the call, Rosalind Brewer, Starbucks’ chief operating officer, discussed progress in cutting the administrative tasks that keeps store workers away from customers. By the end of fiscal 2019, the company expects to free up two to three hours each day.
“We made solid progress against this goal in Q4, redeploying up to one-and-a-half hours per day of non-customer-facing tasks to customer-facing activity, depending on the store,” Brewer said, according to the FactSet transcript.
And on beverages, Brewer said the company’s cold brew and Refreshers were a hit, and Starbucks is making its Nitro drinks available more broadly.
“This is a bullish sign for the future growth as these beverages combined with our core espresso platform represent our coffee-forward heritage more than other more indulging categories,” she said.
Analysts have questioned with those more “indulgent” items, like Frappuccinos, are losing their appeal.
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Still, customers do want to give themselves a treat, which is working in Starbucks’ favor.
“[F]rom our consumer data, it is evident that the healthy consumer economy has stimulated higher spend on small treats and indulgences, including coffee and snacks,” wrote Neil Saunders, managing director at GlobalData Retail. “This has encouraged existing customers to trade up or to buy more while in store.”
Starbucks shares, above $64 Friday, have rallied 13% for the year to date, outpacing the S&P 500 index SPX, -0.69% , which is up 2.2% for the period.
