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Will ETFs Gain on Starbucks' Q1 Earnings Beat Amid Pandemic?

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Sweta Jaiswal, FRM
·4 min read
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Starbucks Corporation SBUX released first-quarter fiscal 2021 results, after market close, on Jan 26. The company’s earnings topped estimates while revenues lagged the same. However, the metrics declined sharply year over year amid the coronavirus pandemic. Notably, shares of Starbucks have declined 5.8% since the earnings release, largely due to weakness in year-over-year comparisons. Moreover, earnings estimates for second-quarter fiscal 2021 were below analysts’ estimates, which might have disappointed investors.

Earnings in Detail

Starbucks reported adjusted earnings of 61 cents per share, surpassing the consensus mark of 55 cents. In the prior-year quarter, the company had reported adjusted earnings per share of 79 cents. Notably, the bottom line surpassed the Zacks Consensus Estimate for the fifth straight quarter. Revenues declined nearly 4.9% year over year to nearly $6.75 billion and lagged the Zacks Consensus Estimate of $6.87 billion. Notably, the top line missed the consensus mark after outpacing the same in the trailing three quarters. The decline was primarily caused by disappointing global retail and comparable sales, and sluggishness in store traffic.

Business Update

Starbucks opened 279 net new stores worldwide in the fiscal first quarter, taking the total tally to 32,938. Global store growth was 4% on a year-over-year basis.

Meanwhile, global comparable store sales declined 5%. Global comps declined due to a 19% decrease in comparable transactions, marginally offset by a 17% increase in average ticket.

The company’s Active Starbucks Rewards loyalty program expanded to 21.8 million active members in the United States, up 15% on a year-over-year basis.

Guidance

Starbucks has updated its fiscal 2021 GAAP earnings guidance. Management noted that fiscal year 2021 is a 53-week year instead of the normal 52 weeks. The company continues to anticipate global comparable sales growth between 18% and 23% in fiscal 2021.

Moreover, fiscal year 2021 earnings are expected in the range of $2.70 to $2.90. However, the company expects GAAP earnings in the range of $2.42 to $2.62, down from the prior estimate of $2.34 to $2.54.

Non-GAAP earnings for the fiscal second quarter are anticipated at 45-50 cents. In the second quarter of fiscal 2021, the company expects comparable sales growth in the band of 5% to 10%.

ETFs in Focus

Investors might want to take a look at a few consumer discretionary ETFs, which have notable exposure to Starbucks and can cash in on the coffee giant’s earnings results:

iShares Evolved U.S. Consumer Staples ETF IECS — 4.24% exposure

It is an actively-managed fund which employs data science techniques to identify companies with exposure to the consumer staples sector. The fund comprises 122 holdings. Its AUM is $24 million and expense ratio is 0.18%. The fund has lost around 2.9% since the coffee giant’s earnings release.

The Consumer Discretionary Select Sector SPDR Fund XLY — 3.35% exposure to Starbucks

The fund tracks the Consumer Discretionary Select Sector Index and comprises 61 holdings. The fund’s AUM is $19.29 billion and expense ratio is 0.12%. The fund has lost 3.1% since Starbucks’ earnings release (read: ETFs in Focus as Amazon Gears Up For Q4 Earnings).

Fidelity MSCI Consumer Discretionary Index ETF FDIS — 2.63% exposure

This fund tracks the MSCI USA IMI/CONSUMER DISCR 25-50 NR USD. The fund’s AUM is $1.39 billion and expense ratio is 0.08%. However, it has lost around 2.1% since the coffee giant’s earnings release.

Vanguard Consumer Discretionary ETF VCR — 2.62% exposure

This fund currently follows the MSCI US Investable Market Consumer Discretionary 25/50 Index. The fund’s AUM is $5.28 billion and expense ratio is 0.10%. The fund has declined 1.9% since Starbucks’ earnings release (read: Will Coronavirus Vaccine & Treatment Optimism Drive These ETFs?).

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Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
 
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