Coffee retailer Starbucks Co. NASDAQ: SBUX The company’s shares were sold off for most of December 2024 as its union workers went on a five-day strike on December 20. The Starbucks Workers Union is a coalition of more than 11,000 baristas across 535 company-owned stores in the United States.
While that may seem like a lot of workers, the retail-wholesale leader employs more than 200,000 people in more than 10,000 stores nationwide.
The company is moving out of the kitchen sink block and faces growing competition from McDonald’s company. New York Stock Exchange: MCD, Dutch Brothers Inc. New York Stock Exchange: BROTS And Lukin Coffee Inc. OTsMCTS: LKNCY. Newly appointed CEO Brian Niccol, former CEO of a fast food restaurant operator. Chipotle Mexican Grill Inc. New York Stock Exchange: CMGtook over management of the wellness plan. Here are four reasons to shop the sale.
1) A workers’ strike is seen as noise at best.
The Starbucks union strike lasted five days to protest the lack of progress in negotiations with management. The union is demanding an immediate 64% minimum wage increase for hourly workers and an overall 77% increase over the course of the three-year contract. The union said the strike was just the first show of force as they were “just getting started.”
The impact of the strike was minor, with only 170 stores temporarily closed and 98% of stores operating as normal. It’s questionable whether management is in a hurry to immediately raise the minimum wage by 64%, especially since it last proposed a 1.5% minimum wage increase in the coming years.
2) Kitchen Sink Quarter Set Low Bar for 2025
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3) The “Back to Starbucks” recovery strategy aims to return to growth.
CEO Niccol implemented a turnaround plan called “Back to Starbucks.” This four-point plan consists of the following:
- Improving the quality of customer service by simplifying menus, speeding up service and reintroducing self-serve condiment bars.
- Price and Value Optimization by eliminating levies on non-dairy milk and focusing on premiumization.
- Empowering your barista by investing in better tools and training, and reducing complexity.
- Refocusing on Core Values reconnecting with the concept of the “third place” as a convenient place to meet and create a cozy atmosphere.
The company is cutting back on new store growth to free up capital to invest in its turnaround plan. It also suspended the release of annual forecasts to allow flexibility in implementing reforms. Starbucks has also stopped using Oleato drinks, which are infused with olive oil.
4) SBUX forms a potential V-bottom pattern
A V-bottom is a reversal pattern consisting of a sustained and sharp sell-off that creates a swing low before activating a buy trigger at a market structure low (MSL) to set up a rally back to the sell-off’s starting point.
SBUX peaked, forming an overhang at a swing high of $103.32 on November 25, 2024. The stock fell to a swing low of $86.46 on December 23, 2024. A buy market structure low (MSL) formed on the candle with a higher low at $89.92. The buy signal was triggered the next day when the stock surged to close at $92.25 after the trigger.
VWAP daily pegged support rises to $89.88. The daily RSI is trying to rise again at the 41 band level. Fibonacci (Fibonacci retracement support levels are located at $88.36, $86.46, $79.15 and $72.53.
Actionable Option Strategies: Bullish investors may consider using cash-backed puts to buy SBUX at Fibonacci retracement support levels to enter and write covered calls to implement a wheel strategy for income.
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