SBUX: Union, What Union?

(SBUX Q1 FY22 Earnings)

The last time I wrote about Starbucks (discussed in “Musings on 2021”), I spoke about how the business was beginning to emerge from covid. Despite mobility restrictions in Asia (particularly China), sales were accelerating and cash conversion cycles (the time it takes to receive payment from the sale of purchased inventory) had floated down from a peak of 45-days in Q3 2020 to 19-days by year-end 2021. I also spoke about the Chinese and Rewards businesses, and the self-induced setback to EBIT margins in light of management reinvesting $1B in staff & training. In doing so, they pushed the return of the LT 18% to 19% EBIT target out one additional year (to 2023). Let’s revisit all of that briefly before jumping to the most interesting topic; the unionist movement that appears to be brewing underneath Starbucks’ nose.

As it turns out, management now expects the return to LT EBIT margins to be extended out to 2024. Whilst revenue guidance ($32.5B to $33B) for 2022 has been reaffirmed, bot…