Starbucks Jumps as Activist Investor Bill Ackman Builds Stake
Starbucks (SBUX) - Get Report shares jumped to the highest level in more than five months Tuesday, pulling the stock into positive territory for the year, after activist investor Bill Ackman said he was building a stake in the coffee chain.
Ackman told Grant's Interest Rate Observer Conference in New York that his hedge fund, Pershing Square Capital Management, now holds 15.2 million shares in the coffee chain, or $900 million. That equates to roughly 1.4% position in the world's biggest coffee chain, which he called "one of the greatest businesses in the world."
"We view the active, engaged dialogue that we have with shareholders as critical input into our strategic approach and we value constructive feedback on delivering long-term shareholder value," Starbucks said in a statement. "We look forward to maintaining a productive dialogue with Mr. Ackman as we do with all of our shareholders."
Starbucks shares were marked 2.6% higher in mid-day trading Tuesday following news of the stake and changing hands at $57.97 each, the highest since May 1 and a move that takes the stock just under 1% higher for the year.
The stock had struggled this year, as its July earnings report showed weakening sales growth. Same-store sales increased 1%, slowing from a 2% growth in the previous quarter, well below expectations for broader U.S. coffee sales to grow at roughly 3% per year from 2018 to 2021.
That quarter, Starbucks' earnings-per-share came in at $0.62, just beating Wall Street's expectations of $0.61, but the full year guidance was slashed. Management guided for earnings of $2.40 to $2.42 for the full year, where as it had previously guided for an upside of $2.43.