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Starbucks to Reopen 85% of U.S. Stores This Week; Fitch Cuts Rating to BBB

Starbucks Corp. (SBUX) said it will reopen 85% of its U.S. stores by the end of this week after seven weeks of home-sheltering orders put in place to contain the spread of the coronavirus pandemic.

By early June, the U.S. coffee chain expects more than 90% of its stores to be open under modified operations and hours. On March 22, Starbucks had shut down its U.S. and Canadian cafes due to the coronavirus-related lockdown regulations.

“We have embraced an approach of monitoring, rapidly adapting to, and even shaping, the “now normal”, Starbucks CEO Kevin Johnson wrote in a letter to employees. “The foundation of our approach comes from what we have learned in China, where more than 98% of our stores are now open and operating under revised protocols.”

Johnson added that the Seattle-based chain adapted these protocols for the U.S. with the goal of exceeding the standards outlined by the Centers for Disease Control and Prevention for a safe experience, including heightened emphasis on cleaning and sanitizing its stores.

About 20 million customers are using the Starbucks App as part of their daily routines, according to Starbucks.

“We will also shift toward more cashless experiences, knowing that the handling of cash creates consumer concerns about the spread of viruses,” said Johnson. “We predict the mobile app will become the dominant form of payment.”

To that end, Starbucks also announced that it expanded services beyond drive-thru to include mobile ordering for contactless pick-up, delivery and, in some locations, curbside pickup and grab-and-go through the cafe.

Separately, Fitch Ratings on Monday lowered the coffee chain’s credit rating to BBB from BBB+ with a negative outlook, citing higher leverage following the proposed debt issuance of $3 billion.

“The negative outlook reflects the significant business interruption from the coronavirus pandemic and the implications of a downturn in discretionary spending that Fitch expects could extend well into 2021,” the credit rating company said.

Wall Street analysts take a cautious stance on the stock. Its Moderate Buy consensus rating is split into 11 Holds and 10 Buys. They $80 average price target reflects a potential 11% upside in the shares in the next 12 months. (See Starbucks stock analysis on TipRanks).

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Sharon Wrobel
Sharon Wrobel is a journalist and writer with two decades of experience covering financial news in the U.S., Europe and the Middle East. Her work has appeared in global publications including The Financial Times, Bloomberg and The Jerusalem Post.

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