The retail apocalypse is hurting Starbucks’ bottom line as less people head to malls and shopping centers where they might step inside a coffee shop.
RBC Capital Markets analyst David Palmer says this is "Starbucks' new normal" and is merely a function of the new retail landscape.
"Starbucks is facing a more difficult operating environment than the recent past," wrote Palmer in a note out Friday. "While the chain did deliver a superior 5% SSS growth result in F3Q, the outperformance was short-lived and trends soon returned to the low- to mid-single digit range.
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"This 'new normal' for the company’s growth rate seems to be a function of both a new reality in retail and diminishing incrementally of Starbucks' growth enablers of food/ beverage innovation, digital initiatives (mobile order & pay), and rewards membership growth."
RBC maintains its outperform rating of Starbucks’ stock and price target of $63 — in line with Wall Street consensus, according to Bloomberg.
"We see stable near-term trends and an attractive valuation level for one of the best large-cap growth stories in consumer,” Palmer said. “We believe the stock's current multiple provides downside support, while the company works to reaccelerate growth towards the second half of FY18."