Starbucks Explores Stake Sale In China Business Valued At Billions Amid Sluggish Growth, Intense Competition From Likes Of Luckin Coffee: Report
For its China business, Starbucks Corp. (NASDAQ:SBUX) is weighing choices including a possible stake sale that would value the assets at several billion dollars.
What Happened: Through a financial consultant, the coffee behemoth has approached technology businesses and private equity firms this week to get comments on its China operations and expansion plans, Bloomberg reported, citing sources.
The action was taken as domestic competitors like Luckin Coffee Inc. (OTC:LKNCY) have gained a sizable market share in China, Starbucks’ second-largest market, and the company confronts growing difficulties there.
Even with almost 7,750 locations, Starbucks’ quarterly revenue in China through March was approximately $740 million, whereas Luckin’s revenue for the same period was $1.2 billion.
Starbucks did not immediately respond to Benzinga's request for comment.
Why It Matters: “We remain committed to China for the long term,” CEO Brian Niccol stated when discussing China operations during an April earnings call. We continue to be open about how we can accomplish that expansion because we see a lot of promise for our company there in the years to come.”
The potential transaction follows similar strategies employed by McDonald’s Corp. and Yum! Brands Inc., which previously sold stakes in their China operations to private equity firms to enhance local market adaptation.
Starbucks’ stock has declined 25% from its February peak amid ongoing challenges. The company recently missed Wall Street estimates in its fiscal second-quarter results, with global comparable store sales dipping 1%.
Price Action: On Wednesday, Starbucks’ stock ended the day at $86.54, down 0.40%. The shares fell 0.12% to $86.43 after hours. Year to date, it’s down 6.11%, according to data from Benzinga Pro.
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