Despite Starbucks (NASDAQ: SBUX) distancing itself from the Israel-Hamas war and negating any donations to the Israeli government or military, it has faced extensive boycotts that have continued for months and taken their toll on the coffeehouse giant.
This has led to a substantial decline in SBUX stock due to weak earnings that missed expectations around the board. Reporting revenue of $8.5 billion, a 4% decrease in comparable sales, and lowered guidance, shares plummeted to a four-year low on May 7 to trade at $72.50.
Boycotts were poised to negatively impact Starbucks in the previous quarter, but they started gaining traction in the last months of 2023, and their effects are showing this year.
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Mounting pressure on international sales due to boycotts
According to Starbucks CFO Rachel Ruggeri, the second quarter of international sales was impacted by issues in the Middle East. Comparable store sales abroad dropped by 6%, partly attributed to decreased sales in the Middle East and other regions like China.
In North America, where comparable sales declined by 3%, analysts at Bank of America suggested that consumer sentiment regarding Starbucks’ involvement in the Middle East contributed to the downturn.
The analysts highlighted that social media discussions about Starbucks’ stance on the Middle East could be a critical factor in the sluggish sales in the US. Many boycott initiatives have utilized social media and technology platforms, including an app directing coffee enthusiasts to alternative cafes near Starbucks outlets.
Other brands were impacted as well
Widespread boycotts also impacted McDonald’s (NYSE: MCD). Last week, CEO Ian Borden, during the first-quarter earnings call, reported that its sales in the Middle East were impacted by ‘the ongoing war.’ This setback outweighed sales growth in Japan, Europe, and Latin America.
In the segment comprising restaurants licensed to third parties, same-store sales dropped by 0.2%.
Following Israel’s invasion of Gaza last October, American brands like Domino’s (NYSE: DPZ) and McDonald’s began to experience the repercussions of boycotts.
Some consumers in the Middle East and other regions have avoided US-affiliated brands due to America’s support for Israel.
These boycotts also affected the latest same-store sales figures for Pizza Hut and KFC, both under Yum! Brands (NYSE: YUM), as revealed in their recent earnings call. For instance, KFC’s same-store sales dipped by 2% in the company’s first quarter.
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