Starbucks CEO Howard Schultz worries about the future of the retail industry, which has been transformed by a “seismic change
” through online and smartphone shopping.
"I think we said three years ago publicly that we began to envision that there would be a seismic change in consumer behavior, and that seismic change was due in large part to e-commerce and smartphone shopping," Schultz said in an earnings call.
"I think today in the headlines you've seen just in the last three weeks store closures of almost 50 Macy's stores, 150 Walmart stores," said Schultz, according to a transcript of the call. "You've got to ask yourself what's going to happen to the future of many of those malls that are anchored by those big-box retailers."
His comments came after the company released earnings results and a second-quarter earnings forecast that fell short of market expectations.
CNBC’s Jim Cramer was one of the few experts not disappointed by the company’s results.
When will Starbucks and its amazing management team finally be given the benefit of the doubt?" the "Mad Money" host asked.
Cramer considered the latest quarter to be the strongest quarter in the company's history.
For those shareholders who dumped the stock, he traced the issues to two unexpected negatives: softer sales in Europe after the Paris tragedy and the slowdown in Chinese growth to 5 percent from 6 percent.
Investor expectations are high for Starbucks, whose sales have risen at double-digit percentage rates for almost two years, so its shares get hit at the slightest sign of trouble, Reuters reported.
"I think it's time to start trusting Howard Schultz when he refutes the critics," Cramer said.
Starbucks' stock, which was trading at $58.65 on Friday, is far more expensive than peers, trading at 29.81 times forward 12-month earnings, according to Thomson Reuters data.
That compares with a median 23.61 in a sector that includes McDonald's Corp. and Dunkin' Brands Group Inc.
Still, analysts said it was a good time to buy Starbucks.
"I recommend buying on the dip; not many restaurants can boast 8 percent comps, nearly 20 percent adjusted operating margins and 15 percent EPS growth. Who does that?" Argus Research analyst John Staszak said in an email to Reuters.
None of the 27 brokerages covering the company recommend selling the stock, and the median price target is $69, well above current levels, according to Thomson Reuters data.
While Starbucks shares have risen 24 percent over the last 200 days, on Friday they came close to slipping below their 200-day moving average price for the first time in 15 years.
This suggests the stock is cheaper than it has been for most of the past year.
(Newsmax wire services contributed to this report).
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