Starbucks To Close Stores For Antibias Training

Starbucks SBUX has announced its plan to close more than 8,000 company-owned U.S. stores for several hours next month, to conduct anti-bias training for nearly 175,000 workers. This move of the coffee-chain giant is mainly aimed to address the recent uproar over the arrest of two black men at one of its stores in Philadelphia.

The company's CEO Kevin Johnson called the incident "reprehensible" and apologized to the two men face-to-face. Johnson said, "Closing our stores for racial-bias training is just one step in a journey that requires dedication from every level of our company and partnerships in our local communities."

Starbucks, being one of the most high-profile brands, announced that it will also provide training materials for non-company workers at roughly 6,000 licensed Starbucks cafes that will remain open in locations such as grocery stores and airports.

The incident is one of the major trials for Johnson, who has already been struggling to increase the company's traffic. The coffee-chain giant has been posting weak sales growth amid persistent decline in the country's restaurant sales. Starbucks reported tepid 2% comps growth in fiscal first quarter in the Americas segment compared with 3% in the year-ago period. Again, competition from other coffee sellers comprising hipster cafes or fast-food chains and convenience stores are added concerns.

Now, apart from tepid sales growth, Starbucks will likely miss revenues owing to store closures. Per MarketWatch calculations, the latest store closures will cost the company about $12 million in lost revenues. Starbucks had earlier closed stores for training in 2008 that cost the company about $6 million.

Although the company will have to bear the burnt of revenue loss owing to store closures, the company's move in offering company-wide training is the right thing for Starbucks' business to sustain its reputation.

Share Price Performance

Starbucks' shares have gained 8.4% in the last six months compared with the industry's growth of 2.7%. The company is strengthening its portfolio with major innovations, best-in-class loyalty program and digital offerings to counter tepid sales growth. Meanwhile, earnings estimates for the current quarter have moved down one cent while remaining unchanged for the current fiscal year over the last 30 days.

Zacks Rank & Stocks to Consider

Starbucks carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the same space are Dine Brands Global, Inc. DIN, Arcos Dorados Holdings Inc. ARCO and Ruth's Hospitality Group, Inc. RUTH, each sporting a Zacks rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Dine Brands is expected to witness 22.7% earnings growth in 2018.

Arcos has a 3-5 years expected EPS growth rate of 19.4%.

Ruth's Hospitality's 2018 earnings are expected to grow 22.7%.

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