Starbucks shares rise as Niccol’s turnaround gains momentum

July 30 (Reuters) – Starbucks shares jumped 5.6% in premarket trading on Thursday, after a fourth straight quarter of comparable sales growth and increased annual targets indicated CEO Brian Niccol’s efforts were yielding sustainable results.

• Niccol’s turnaround completes two years in September, and has resulted in Starbucks trying to woo consumers in the United States through a mix of simplifying its menu and revamping its stores to return to its coffeehouse roots.

• The company has also tried to reduce wait times and has closed some underperforming stores, including its iconic Seattle roastery.

• The coffee chain was continuing to assess its North America store portfolio, which could lead to some more closures, executives said on Wednesday at a post-earnings call.

• Starbucks would also double down on its efforts to remodel stores, executives said, with the target to complete at least 500 more remodels by the end of the fiscal year.

• “Broader macro uncertainty hasn’t thrown a wrench in Starbucks’ turnaround,” said Morningstar analyst Ari Felhandler in a note.

• At least three brokerages, including RBC Capital Markets, Morgan Stanley and Jefferies, raised their price targets on the Starbucks stock on Thursday.

• “We surmise investors are baking in near-term turnaround growth far into the future … despite a highly competitive landscape,” Felhandler added.

• The company’s 12-month forward looking price-to-earnings ratio was 35.11, compared with an industry median of 15.37, according to data compiled by LSEG.

• Starbucks’ shares have risen about 23% so far this year.

(Reporting by Juveria Tabassum in Bengaluru; Editing by Joyjeet Das)