3 Reasons Why Starbucks Could Win as Students Return to Classrooms

Millions of students will be returning to classrooms this month. For Starbucks, that will be an opportunity to capture more sales as people leaving their homes are more likely to visit one of its locations.

The company’s revenue was harmed during the pandemic as folks were working from home, learning from home, and entertaining themselves at home. This left fewer occasions when one could frequent a Starbucks store on their way to work, school, or a ballgame. Now, in this next leg of economic reopening with students returning to classrooms, Starbucks can benefit in three ways.

1. Returning to the office

The coronavirus pandemic sent millions of employees home to work remotely, some others were put on furlough, and millions more lost their job completely. According to the U.S. Bureau of Labor Statistics, there are now three million more unemployed people than there were in the month before the pandemic’s onset. That’s despite businesses complaining there are more open jobs than people they can find to fill them.

Although several factors could be playing a part in the mismatch, one factor was the lack of affordable child care. Kids were learning remotely at home and needed to be supervised by at least one parent. Now that many kids will be returning to classrooms, that parent can go back to work outside of the home.

Interestingly, estimates show that the average office worker drinks 1,000 cups of coffee per year. With some parents of school-aged children returning to offices, coffee consumption could increase . And since Starbucks is one of the leading places people go to get coffee, it is likely to benefit from that increased consumption.

2. Going back to school 

With students returning to classrooms, it creates an increase in consumer mobility. Students will need to get to school and get home from school, and some of them will need to be accompanied by a parent or guardian. Those are two additional occasions during the day where a person may decide to stop at a Starbucks to quench their thirst with a “cup of Joe.”

Starbucks has 15,348 locations in the U.S. Chances are there is one near the route you take to school from your home or job. Indeed, management said, “The reopening of markets is translating to incredible increases in demand for Starbucks as people are again on the go, reconnecting and socializing with one another.”

3. Heading back to college

Finally, the return of in-person classroom learning means Starbucks can reopen its more than 300 locations on college campuses. Importantly, it may appear like a small fraction of its overall stores in the U.S., but these are often  high-performing stores. Campuses usually have thousands of students coming and going from morning till night. At least some students studying for exams and completing research reports will likely visit the Starbucks on campus for a little pick-me-up.

What this could mean for investors 

Starbucks is well on its way to recovering lost revenue from the pandemic. Management guided investors to look for annual revenue of about $29 billion in fiscal 2021. That figure would be roughly 10% higher than its annual revenue in 2019 — before the disruption caused by the pandemic in 2020.   The return to classrooms and offices could enhance that growth even further. Still, there is the chance that an outbreak of COVID-19 cases in schools or the general population could cause cities and states to send students back to remote learning and employees back to remote working. Barring that outcome, Starbucks could get a sales lift from the return to the classrooms.

Mind you, the stock is near all-time highs, so much of these good prospects may be priced in at the moment, but any nearterm dips could be a buying opportunity.