This week, coffee stores operator Starbucks Corp. (SBUX) delivered mixed first-quarter results, as revenues beat but earnings missed estimates.
Buoyed by double-digit revenue growth in licensed as well as company-operated stores, total revenue increased 19.3% year-over-year to $8.1 billion, beating estimates of $7.97 billion. Earnings per share, too, jumped 18% year-over-year to $0.72 but fell short of analysts’ expectations of $0.79.
Importantly, along with robust demand, management highlighted inflationary pressures, higher costs, and challenging labor market trends. With these developments in mind, let’s have a look at what’s changed in SBUX’s key risk factors that investors should know.
Risk Factors
According to the TipRanks Risk Factors tool, Starbucks’ top two risk categories are Production and Macro & Political, which comprise six risks each of the total 24 risks identified for the stock. In its recent report, the company has changed one key risk factor under the Production risk category.
Starbucks notes that wages and benefits are two of its most significant costs. Amid the COVID-19 pandemic, the company witnessed a shortage of labor and this may occur in the future as well. These factors combined with an increase in the cost of labor could have an adverse impact on SBUX.
Compared to the sector average of five Production risk factors, SBUX is at six.
Hedge Fund Activity
TipRanks data points that Wall Street’s top hedge funds have increased holdings in Starbucks by 129.3 thousand shares in the last quarter, indicating a positive hedge fund confidence signal in the stock based on the activities of 19 hedge funds. Importantly, Ray Dalio’s Bridgewater Associates has a holding worth approximately $251.6 million in SBUX.
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