Starbucks Corp. saw its shares take a deep dive as they lost 7% of their value on Friday. The loss of market influence coincides with a membership growth in the United States that seemed to have its power dinted. As a consequence, investors are concerned about the capability of the company to achieve its long-term goals.
Change of Loyalty Program Impaired Starbucks’ Membership Growth
On Thursday, Starbucks Corp. revealed its quarterly earnings. While the first quarter was on point with analysts’ expectations, the last three months revealed a disappointing evolution for the chain of coffee shops. The new CEO Kevin Johnson could no longer deliver positive results.
New yet powerful competition already undermines Starbucks’ U.S. activity. Convenience stores and meal kit sellers are slowing down the development of the company through their services and products. On top of that, the alterations Starbucks made to its loyalty program in 2016 might have impaired membership growth by a lot.
Analysts at Credit Suisse share these concerns. To them, the company will have trouble maintaining the same store sales that the investors are used to, let alone earnings increase. The change that triggered this chain reaction was rewarding clients with points for every dollar they spend in a Starbucks location. Prior to this alteration, customers used to earn points for every item they bought in a store. As a consequence, customers are no longer rewarded for going on a budget.
Wall Street Penalized Starbucks with 7.6% Decrease in Shares
Starbucks’ long-term forecast might be in jeopardy in light of recent events. They expect a double digit revenue growth and 15 to 20% more earnings. However, these terms might no longer pertain to realistic goals considering the situation.
Wall Street felt the same on Friday as it dropped Starbucks’ shares by 7.6% at $54.95 in early trading. Therefore, the company was in danger to lose a total of $7 million in just one trading day in market value.
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