Starbucks (SBUX) shares are rising on Monday following a report from The Wall Street Journal that activist investor Starboard Value has taken a stake in the company, aiming to boost the stock. Gregory Francfort, Guggenheim Partners Senior Analyst joins Market Domination to discuss his outlook on Starbucks.
Francfort acknowledges that Starbucks has "struggled" in recent years for "a variety of reasons," noting that "a lot of it is structural and a lot of it is industry-wide." He points out the company’s aggressive unit growth, saying "it doesn’t make sense" given the increased competition in the market. With new stores not contributing as much revenue as expected, Francfort suggests the company needs to "turn down the growth valve."
Regarding new products boosting sales and the brand, Francfort tells Yahoo Finance, "It’s only 600 million dollars of incremental sales. I’m not sure if it’s making a dent on a $30 billion-dollar in sales brand." While he describes the new product innovations as "decent" and "pretty solid," he notes that marketing efforts have fallen short.
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