On June 4th, 2020, we initiated a position in Starbucks Corporation (SBUX) due to the attractive valuation of the company’s stock and its solid business fundamentals.
Starbucks is a widely known restaurant company and coffee roaster, selling coffee, food, and accessories worldwide in over 30,000 restaurants. Approximately two-thirds of sales comprise the Americas (primarily the U.S. and Canada), while one quarter are outside the Americas (primarily China, Japan, and Europe), and the remainder are generated from consumer-packaged goods including whole bean and ground coffees, single-serve drinks, and other branded products. Half of Starbucks’ stores are company-owned, and the other half are licensed to large-scale, long-term partners.
Driving our investment thesis are the company’s strong competitive advantages, including its brand, economies of scale, network effect from its digital loyalty program and large store base, and track record of successful menu and technological innovation. Other positives include diversified revenue sources, a solid management team, and strong environmental, social, and governance scores.
Tempering our enthusiasm are current weaknesses driven by the ongoing coronavirus containment efforts, including reduced air travel and commuting, as well as longer-term challenges due to the competitive industry and low customer switching costs. While we believe that Starbucks is well-positioned to recover from the current crisis, we recognize that there will be near-term challenges, and that we must take a long-term view.
Overall, given the strength of Starbucks’ underlying business model and the attractive valuation of the company’s stock, we are pleased to add the company to our portfolios.
Fund holdings are subject to change and should not be considered recommendations to buy or sell any security. For a listing of the funds current holdings, please click here.