Please ensure Javascript is enabled for purposes of website accessibility

Starbucks Plans a Gradual Reopening Based on Its China Experience

By Rhian Hunt - Apr 16, 2020 at 12:49PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Its executives paint a cautiously positive picture.

Starbucks (SBUX -0.55%) said in an update today it plans to start inching cautiously toward more normal operations following its shutdown of most in-store sales as the coronavirus pandemic gripped the U.S. The company has been limiting service to delivery and drive-through only, with an intention to keep its stores closed to regular customer traffic at least through May 3.

Now, Starbucks CEO Kevin Johnson declared the start of a "new phase" of its business model, which he terms "monitor and adapt." The company's outlets will watch the COVID-19 situation and use a set of clearly defined guidelines to add services when it's deemed safe to do so. Some arrangements potentially on offer, based on local conditions, include contactless pickup or limited seating in compliance with social distancing.

Several Starbucks beverages on a countertop.

Image source: Starbucks.

Johnson and CFO Patrick Grismer wrote an open letter today which they filed with the SEC as an 8-K Current Report. In the letter, the two executives state they're using the earlier Starbucks experience dealing with COVID-19 in China as blueprint for their strategy in the U.S. They note 95% of Starbucks locations in China are currently open, though with limited seating and reduced working hours as Chinese regulations in the wake of the coronavirus demand.

The executives say they expect a full recovery of Starbucks' Chinese business over the next two quarters. This leads them to predict a similar rebound in the U.S., with a return to the "very strong margin performance" seen before the pandemic. They also say Starbucks has approximately $3.5 billion in liquidity from borrowing, and that the quarterly dividend probably won't be reduced.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Starbucks Corporation Stock Quote
Starbucks Corporation
$77.68 (-0.55%) $0.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.