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Investing.com - TD Cowen has reiterated its Hold rating and $95.00 price target on Starbucks (NASDAQ:SBUX), currently trading at $83.67, following the coffee giant’s announcement of new turnaround initiatives. According to InvestingPro data, analyst targets range from $73 to $115, with the stock currently trading at a relatively high P/E ratio of 36.17.
The company revealed plans to accelerate store closures to improve financial performance and brand perception, projecting a 1% decline in North American net restaurant growth by the end of 2025. This represents a significant shift from previous growth estimates of 3.5%, with analysts estimating approximately 500 North American company-owned locations will close in fiscal Q4 2025. InvestingPro analysis indicates that net income is expected to decline this year, with the company maintaining a FAIR overall financial health score.
Starbucks also announced a second round of corporate layoffs affecting 900 non-store level positions, following 1,100 job cuts announced in February. These reductions impact a portion of the approximately 10,000 U.S. non-retail roles indicated in the company’s 2024 annual report.
The restructuring efforts will result in $1 billion in costs, including $150 million in severance, $400 million in non-cash impairment and disposal expenses, and $450 million in amortization of lease assets due to early store closures. Starbucks plans to report these charges as a separate line item and adjust them in non-GAAP earnings per share. With current revenue of $36.69 billion and a market capitalization of $94.91 billion, these restructuring costs represent a significant investment in the company’s future. For deeper insights into Starbucks’ financial health and future prospects, investors can access the comprehensive Pro Research Report available on InvestingPro.
TD Cowen has adjusted its growth projections for Starbucks, lowering North American company-owned net openings estimates to 2% and 2.6% for 2026 and 2027 respectively, down from previous estimates of 2.2% and 3.0%. The company has indicated it expects to return to growth in 2026. Despite current challenges, Starbucks maintains its position as a prominent player in the Hotels, Restaurants & Leisure industry, with a track record of 15 consecutive years of dividend increases.
In other recent news, Starbucks has announced a significant restructuring plan involving a $1 billion investment aimed at revitalizing its store portfolio and improving customer experience. This plan includes the closure of certain coffeehouses that do not meet specific criteria for physical environment or financial performance, with most closures expected by the end of the fiscal year. Additionally, the restructuring will result in the elimination of approximately 900 jobs as Starbucks seeks to streamline its operations. In a separate development, global investment firms Carlyle Group and EQT are among the final bidders for a controlling stake in Starbucks’ China operations. The bids for the China business, which have been submitted, value the operations at up to $5 billion. This valuation is based on approximately 10 times the expected EBITDA for 2025. Starbucks has also requested non-binding bids from a shortlist of potential buyers, including private equity firms and technology giant Tencent. These developments highlight Starbucks’ strategic efforts to optimize its global operations and financial performance.
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