Starbucks demand 'hasn't been an issue' ahead of reinvention plan, analyst says

Wed, August 3, 2022 at 9:25 PM UTC

2 min read

Starbucks customer demand hit record highs in its fiscal third quarter as the 50-plus-year-old company is gearing up for a major "reinvention."

"Demand really hasn't been an issue," Jefferies Managing Director Andy Barish emphasized on Yahoo Finance Live (video above). Instead, it's the labor portion of the business, the people that fulfill that demand, that will be in focus in the fiscal fourth quarter.

Barish explained that Starbucks is "focusing internally and spending a fair amount of money" on partners, which Starbucks calls employees.

Florida, Sebring, Starbucks Coffee Barista at work. (Photo by: Jeffrey Greenberg/Universal Images Group via Getty Images)

In May, Starbucks interim CEO Howard Schultz announced a $1 billion investment in its U.S. partners and stores for the 2022 fiscal year.

That announcement included an update to the company's plan to increase wages for all U.S. hourly earners from $12 an hour to at least $15 per hour, which went into effect on August 1. Currently, the average wage for Starbucks workers is $17 an hour.

That new minimum wage could change again, according to Barish, who has a buy rating on the stock and a price target of $100.

"It's is being raised, obviously, by some of the headlines around unionization and things like that," Barish said. He added that the investment in people is "not a new thing" for the brand and that Starbucks remains a leader in the industry.

NEW YORK, NEW YORK - JULY 19: Activists participate in an event dubbed the Un-Birthday Party and picket line for Starbucks CEO Howard Schultz on July 19, 2022 in New York City. Activists gathered near Schultz's West Village home on his 75th birthday to protest the treatment of Starbucks workers attempting to unionize, as well as Schultz's recent announcement to permanently close 16 locations. The company has stated that the closing of the stores, which are mostly located on the West Coast, is due to safety concerns. However, Starbucks Workers United, the union representing the baristas, has filed a labor complaint claiming that the store closures is an act of retaliation. Over 100 of the company's 9,000 U.S. stores have voted or are in the process of voting to unionize since a Buffalo, New York location became the first to join a union at the end of 2021. (Photo by Michael M. Santiago/Getty Images) — Activists participate in an event dubbed the Un-Birthday Party and picket line for Starbucks CEO Howard Schultz on July 19, 2022 in New York City. (Photo by Michael M. Santiago/Getty Images)

In a call with analysts Tuesday, Frank Britt, who recently stepped into the role of Starbucks Chief Strategy Officer, highlighted the top "five major strategic shifts" in the company's reinvention plan. They include ongoing partner co-creation, "fully embracing the need to radically improve our in-store partner experience," reimagining stores, evolving customer re-connection, and redesigning "what partnership means at Starbucks."

More is expected to be revealed at the coffee chain's Investor Day, which is set to take place Tuesday, September 13 in Seattle, Washington.

"This move and a lot of the other things that Starbucks has done over many, many decades as being one of the most, if not the most, progressive employers in the restaurant industry, I think points to what will be a step up here but then kind of a leveling out of reinvestment in their partners," Barish stated.

Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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