Starbucks rallies again as investors dig for clues into the master plan

Starbucks (NASDAQ:SBUX) added another 3.1% on Wednesday as the company’s post-CEO switch rally continued.

TD Cowen weighed on the first strategy update from incoming Starbucks (SBUX) CEO Brian Niccol that was issued in an open letter that he published. Analyst Andrew Charles said that he believes Niccol is focused on the right drivers to improve traffic, and is acting with a sense of urgency.

“We appreciate the acknowledgement for the drift in store operations to establish credibility, as this is a focus area underpinning the upcoming turnaround,” updated Charles. The firm continues to assert that a faster rollout of the Siren System is needed beyond 10% of stores per year to improve speed of service and the barista experience. TD Cowen also believes comments on “menus can feel overwhelming” reflect a commitment to digital menu boards over the next 3 years and/or SKU rationalization.

Looking ahead, Charles and his team look forward to learning what evolving the app & mobile order processes, as well as a clear distinction between “to-go” and “for-here” service, look like. Interestingly, the interpretation of Niccol’s comment that “in China, we need to understand the potential path to capture growth and capitalize on our strengths in this dynamic market” is seen as a commitment to exploring a new ownership structure via a joint venture or refranchising.

“We continue to believe new China ownership is critical to improving ROIC & streamlining focus on improving U.S. traffic,” highlighted Charles.

Yum! Brands (YUM) separated its China business into Yum China (YUMC) in 2016. Yum China (YUMC) later completed a secondary listing on the Hong Kong Stock Exchange on September 10, 2020, further expanding its presence in Asian financial markets.