KKR & Co (KKR) and its Asian rivals, such as FountainVest Partners and PAG, are reportedly competing to acquire a stake in Starbucks’ (SBUX) China operations. Reuters, citing familiar sources, reported that the coffee chain’s CFO, Rachel Ruggeri, and other top executives are set to visit China soon for sale discussions.
Starbucks China Stake Attracts Multiple Buyers
The sale of a stake in Starbucks China has attracted multiple buyers. Chinese firms, including state-owned China Resources Holdings and food delivery giant Meituan (MPNGF), have also been contacted as potential buyers. The report further stated that the size of the Starbucks China stake up for sale is yet to be decided and will depend on negotiations.
In China, the company faces slow economic growth and tough competition from local rivals like Luckin Coffee (LKNCY). Consequently, Starbucks has been in informal discussions since mid-2024 with private equity firms and companies about strategic options for its China business.
Meanwhile, Starbucks would likely favor a franchise deal with a strategic partner as part of the stake sale, according to two sources. In this setup, Starbucks China would be valued at over $1 billion.
Starbucks Pushes for Growth amid Challenges
The discussions around stake sales come into the picture as Starbucks looks to restore its growth amid challenges like falling demand in the U.S. and China. Notably, U.S. and China stores made up 61% of Starbucks’ global portfolio at the end of the fiscal first quarter, which ended on December 29, 2024. Overall, Starbucks reported a fourth straight quarter of declining same-store sales in Q1 FY25. Meanwhile, the company’s global comparable store sales declined 4%. However, Wall Street had predicted a 5.5% decline.
Recently, Starbucks also announced plans to cut 1,100 corporate jobs to streamline operations and enhance the U.S. customer experience.
Is Starbucks a Good Stock to Buy?
On TipRanks, SBUX stock has a Moderate Buy consensus rating based on 15 Buys, five Holds, and one Sell assigned in the last three months. The average Starbucks stock price target of $110.70 implies a 2.2% decline from current levels.
Year-to-date, SBUX stock has gained 24.04%.
