Starbucks Plans Eco-Friendly Move, To Expand Plant-Based Menu

As part of its new sustainability commitments, Starbucks Corporation (NASDAQ:SBUX) announced that it has set few science-based primary targets for the reduction of carbon emissions, water use and waste, which it intends to achieve by 2030.

The Seattle-based coffee chain aims at prioritizing its five strategies to become resource positive. The strategies include expansion of its plant-based menu thereby making it more environment friendly, shift to reusable packaging, investment in innovative agricultural practices and forest conservation efforts, better waste management and development of more eco-friendly stores, operations, manufacturing and delivery.

Notably, per the CEO, Kevin Johnson, the three targets for 2030 are to cut carbon emissions by half in the company's operations and supply chain; halve water usage for operations and coffee production; and halve the amount of waste sent to landfills.

We believe these eco-friendly moves are cost effective and should help improve margins. Persistent decline in margins in each quarter of fiscal 2019 has been a major concern for the company. In the first, second, third and fourth quarter of fiscal 2019, margins declined 180, 40, 20 and 80 bps year over year to 17.4%, 15.8%, 18.3% and 17.2%, respectively.

Price Performance

In the past year, shares of the company have outperformed the industry. The stock has rallied 39.3% compared with the industry’s 20% growth in the same time frame. The outperformance can be attributed to rise in global comparable store sales of 5% in the fourth quarter, which was led by 6% comps growth in the United States and 5% in China.

Zacks Rank & Key Picks

Starbucks currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the same space include Chuy's Holdings, Inc. (NASDAQ:CHUY) , Denny's Corporation (NASDAQ:DENN) and Domino's Pizza Inc (NYSE:DPZ) . While Chuy’s and Denny’s sport a Zacks Rank #1 (Strong Buy), Domino’s carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chuy’s, Denny’s and Dominos have impressive long-term earnings growth rate of 17.5%, 9% and 13.7%, respectively.

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