Shares hit as Starbucks almost near saturation in US

It’s only a joke that there’s a Starbucks on every corner. However, the proliferation of the cafes is hindering the company’s growth, according to a recent report from BMO Capital Markets.

Andrew Strelzik, an analyst at the bank, downgraded Starbucks recently and lowered his price target on the shares, arguing that the abundance of locations in the US means that stores are stealing sales from each other and weighing down the company’s results.

Competitor Dunkin’ Donuts is also suffering from a saturated US fast-food market, and recently lowered its new-store target.

There are more than 13,000 Starbucks cafes in the US, including 240 in Manhattan.

Dunkin has 161 locations in the borough, though it has more locations than Starbucks in the whole of New York City.

The tough fast-food competition in the US has pushed Starbucks to increasingly target China as a key growth market.

Shares of the company have dropped 4.4% this year.

The shares had fallen 7.5% in 2016.

Dunkin’ brands shares are roughly flat for 2017.

In its push into China, Starbucks is hoping a €1bn deal for control of more than 1,000 coffee shops wil help it tap Chinese youth’s growing taste for coffee to drink less tea.

While volumes remain low by global standards, a shift towards coffee in the most-populous and biggest tea-drinking nation could have a massive impact over time.

Bloomberg


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