Being "targeted" by the investment giant Elliott, Starbucks surged 7% intraday

After the news that Elliott Investment Management, a giant in active investment funds, "favored" Starbucks, the stock price of Starbucks soared during trading hours.

At midday in the US stock market, in just about ten minutes, the Starbucks stock price rose from nearly $74.60 to above $79.20. The intraday increase expanded rapidly from less than 0.6% to about 6.8%. The increase further expanded towards the end of the session, hitting a daily high of $79.38, with an intraday increase of about 7%. It ultimately closed up nearly 6.9%, marking the largest increase since November 2nd last year, rebounding to the highest closing level since June 25th after two consecutive days of decline.

Before the surge in Starbucks stock price, media reports cited informed sources saying that Elliott Investment Management had already held a large number of Starbucks shares. This active investment institution has been pushing Starbucks to find ways to boost its stock price. In recent weeks, Elliott has been in private contact with Starbucks, and the two parties may soon reach an agreement in private.

The media could not confirm the undisclosed size of Elliott's stake in Starbucks, stating that it is currently unknown what other requirements Elliott has for Starbucks, such as seeking a seat on Starbucks' board of directors.

Subsequently, a Starbucks spokesperson stated that the company "does not comment on rumors and speculation." Representatives of Elliott did not immediately respond to requests for comments from other media.

Commentators believe that Elliott's investment comes at a significant crossroads in Starbucks' development. In terms of store count and sales, Starbucks is the world's largest coffee company. Starbucks has long been committed to becoming a "third place" for gatherings outside of customers' homes and workplaces. However, the delivery business has become the industry's growth engine, while Starbucks has struggled to keep up with this trend. In the crucial Chinese market, competition for Starbucks is intensifying.

Starbucks' recent financial report highlighted the challenge of meeting the expectations of its management.

At the end of April this year, Starbucks announced that its revenue for the second quarter of fiscal year 2024 fell by 1.8% year-on-year to $8.563 billion, far below analysts' expectations of $9.13 billion, marking the first quarterly sales decline since the end of 2020; net profit for the quarter fell by about 15% year-on-year to $8.563 billion, also significantly below expectations.

In the second quarter, Starbucks' same-store sales fell by 4%, while analysts expected an increase of 1.46%. In the US market, same-store sales fell by 3%, marking the second consecutive quarter of poor performance domestically, with analysts expecting a growth of 2.31%. Customer traffic in the US dropped by 7%, the largest quarterly decline since 2010. Outside the US international markets, same-store sales fell by 6% in the quarter, with a 11% decline in same-store sales in Starbucks' second largest market, mainland China Along with the release of the second-quarter report, Starbucks lowered its guidance for the third quarter and adjusted its revenue and profit guidance for the entire fiscal year, reducing the annual revenue growth expectation from 7% to 10% to low single digits. The global and U.S. same-store sales growth expectations were revised from the previous 4% to 6% to flat to low single digits, with an expected single-digit decline in same-store sales in mainland China instead of the previously anticipated single-digit growth.

On the first trading day after the financial report was released on May 1st, Starbucks' stock price plummeted by 18% at one point, closing down 15.9%, marking the largest daily decline since May last year.

Following the financial report, Starbucks executives stated that the company is losing "occasional visitors" type of customers, with 1.5 million active loyalty reward users decreasing from the end of the first quarter to the end of the second quarter.

Huaerjie Jianwen previously pointed out that in the context of high prices, consumer spending in the catering sector has shown weakness, directly reflected in the "headwind" of consumer brand performance. Not only Starbucks, but also the two global catering giants Pizza Hut and KFC reported a decline in quarterly sales in their latest financial reports.

In a tightening consumer environment, major catering brands are determined to lower prices to gain market share. Starbucks announced that it will open transactions limited to its application to non-loyalty members for the first time in July. According to a report by The Paper in early May, Starbucks is "quietly" offering discounts, launching group purchases, full reductions, discounts, and various other promotional activities, opting for "volume over price"