$Starbucks(SBUX.US)

Starbucks: The Store Closures Raise Bigger Questions

Starbucks is closing another 250 coffeehouses across North America. On the surface, it looks like another round of cost cutting. But for investors, it raises a bigger question: has a business model once considered almost bulletproof become harder to defend?

The FY2026 numbers tell a mixed story. Q3 comparable sales improved 7.9% globally and 8.1% in North America, with transactions also rising. That suggests customers are returning and CEO Brian Niccol’s turnaround is gaining some traction.

The problem is margins. North American operating margin was only 13.6%, well below the levels Starbucks enjoyed historically. Closing underperforming stores may improve the portfolio, but it also shows that not every Starbucks location can generate attractive returns anymore.

That makes the management change less of a quick fix than initially hoped. Niccol has helped revive traffic, but the harder job is turning that traffic into sustainable earnings and cash flow.

Valuation is another concern. At around US$94, Starbucks trades at roughly 32x forward earnings and close to 29x free cash flow. Those are not cheap multiples for a company still repairing its margins.

Technically, the picture is less convincing. The share price remains below its 50-day and 200-day moving averages, while MACD is negative. RSI around 41 suggests weakness, but the stock is not yet deeply oversold.

The message from the 250 closures is therefore fairly simple: Starbucks still has a powerful brand, but the old growth formula cannot be taken for granted. FY2026 shows improving demand, yet investors now need to see margins catch up. The turnaround has moved from fixing traffic to proving the economics of the business.

Not financial advice.