Market Overview

Analyst Doesn't Expect Starbucks Sales To Be Hit By New 'Third Place Policy'

Analyst Doesn't Expect Starbucks Sales To Be Hit By New 'Third Place Policy'

Starbucks Corporation (NASDAQ: SBUX) responded to criticism on Monday after it announced a new “Third Place Policy” over the weekend allowing anyone to use their cafes — even if they don’t purchase anything. The policy is part of Starbucks’ plan to combat racial bias in its stores.

While the announcement drew support from some, the most vocal commenters stood in opposition, complaining that there wouldn't be enough seats for paying guests.

Others, such as Fox News’ Rob Schmitt, said they expect Starbucks stores to become homeless shelters, particularly in cities.

On Monday, the company told the Wall Street Journal that employees have received instruction on how to handle patrons who are acting in disruptive or inappropriate ways.

Many people announced on social media that they will avoid Starbucks stores because of these concerns. The natural question for investors then, is how sales might be affected moving forward.

Some Risk Of Incident, But Nothing To Worry About

“It was an extreme point of accommodation,” Tigress Financial analyst Ivan Feinseth told Benzinga. “At some point they are going to have an isolated incident, and they are going to have to deal with that.”

That said, Feinseth doubts very many customers will be dissuaded from getting their caffeine fix from the Seattle-based chain. “I do not believe it will become a major problem.”

If anything, Starbucks may stand to gain from the new policy’s implementation. The company thrives on being perceived as customer and community friendly. Even if any problems were to emerge with disruptive guests, on aggregate the Third Place Policy could put it in a better light.

On the potential overcrowding issue, Feinseth noted that Starbucks likes to have full stores. “If you walked into an empty store you would not find it that inviting,” he said.

Looking ahead, Wall Street is widely focused on whether the company can continue its rapid growth in China.

Tigress Financial maintains a Buy rating on Starbucks.

Price Action

Starbucks shares closed Tuesday at $56.97. The stock jumped to a high of $57.77 on Monday following the policy announcement, but pulled back to close the day at $57.34.

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Latest Ratings for SBUX

Apr 2019UBSDowngradesBuyNeutral
Jan 2019Goldman SachsDowngradesBuyNeutral
Dec 2018Wells FargoReiteratesOutperformOutperform

View More Analyst Ratings for SBUX
View the Latest Analyst Ratings

Posted-In: Ivan FeinsethAnalyst Color News Restaurants Top Stories Exclusives Analyst Ratings General Best of Benzinga


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