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Why Starbucks' Shares Are Surging Today

By John Rosevear - Mar 24, 2020 at 11:37AM

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A CEO interview helped encourage investors to jump in.

What happened

Shares of Starbucks (SBUX 3.87%) surged on Tuesday morning, after its CEO said that the company's balance sheet is strong and that it is applying lessons learned in China to get through the coronavirus pandemic in the United States. 

As of 10:45 a.m. EDT, Starbucks' shares were up about 11.4% from Monday's closing price. 

So what 

In an interview with CNBC on Tuesday, CEO Kevin Johnson made a few points intended to reassure nervous investors:

  • Starbucks learned its COVID-19 "playbook" over nine weeks of dealing with the pandemic's initial outbreak in China. It's now applying lessons learned in China to its businesses in North America and Europe.
  • Starbucks has already reopened many of its stores in China. It's "going slow" in Wuhan, the city hit hardest by the virus, but its stores are reopening there as well. 
  • Starbucks' balance sheet is strong, and the company should have no trouble weathering a period of reduced revenue while the pandemic continues in the U.S.

Johnson's comments, together with the expectation that Congress will agree on a huge stimulus and relief package today, apparently convinced investors to start jumping back into the stock. 

3 cold-drink cups with Starbucks logos.

Image source: Starbucks.

Now what

Starbucks said last week that it has moved to a "takeout-only" model in the United States, eliminating seating inside and outside its stores for the time being. The company has also stepped up sick-leave benefits for workers and is allowing workers to stay home -- for any reason -- for the next few weeks with full pay. 

Johnson has so far made all the right moves to take care of employees while generating some revenue during a difficult period. Now investors will have to watch and wait, to see how the pandemic plays out -- and how quickly the economy recovers after. 

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