Company / Analytics

Analytics, 10 December 2021

How Unionization vote will affect Starbucks stock

A Starbucks store in Buffalo, New York has become the first location in the U.S to unionize after employees voted by a margin of 19 to 8 to join the Workers United Union. Two other stores in the region also voted on Thursday – one said no while the results at the third location weren’t conclusive.

Starbucks has about 9,000 corporate-run stores in the US. While some workers at US Starbucks franchises, such as kiosks in other stores, belonged to unions, no US employees of Starbucks itself are unionized.

Investors are concerned about how this tipping point could affect Starbucks stock. While the Buffalo vote represents only about 100 employees spread among the three stores, Starbucks took the organizing effort very seriously, sending top executives to the Western New York city where the votes took place, as the company is concerned about the large-scale impact’s unionization will have on its labor costs and balance sheet.

Analysis: Starbucks Staff vote to Unionize

A Starbucks (NASDAQ: SBUX) store in Buffalo has become the first location in the country to unionize after employees voted by a margin of 19 to 8 to join the Workers United Union. Two other stores in the region also voted on Thursday, but one said no, while results at the third location weren’t conclusive. Never in the coffee chain’s 50-year history has it relied on union workers to serve up its lattes among its 9,000 corporate-run stores across the U.S.

Analysts are sizing up what kind of tipping point could be in store as this is the first-ever labor foothold to hit Starbucks. Three more locations in Buffalo are also heading towards union elections, as well as another store in Mesa, Arizona that just filed for a vote. The fact that there was also a win in the restaurant industry - where there are almost no unions - could heat labor movements and advocacy across the country.

The union drive has preoccupied Starbucks executives for months and the company even unveiled a wage increase in October that would raise the average barista’s salary to nearly $17 an hour (from $14) by next summer. “This win is the first step in changing what it means to be a partner at Starbucks, and what it means to work in the service industry more broadly, said Michelle Eisen, a barista who works at the now-unionized Elmwood location in Buffalo. “With a union, we now have the ability to negotiate a contract that holds Starbucks accountable to be the company we know it can be and gives us a real voice in our workplace.”

How did the stock react?

The vote didn’t seem to dent Starbuck’s stock. Shares were down 0.8% to $115.35 in Thursday trading, mostly in line with the S&P 500 index.

The union push drew national attention, including from high-profile politicians. Sen. Bernie Sanders congratulated the workers “on the HISTORIC achievement” in a post on Twitter. “The company should stop pouring money into the fight against the union and negotiate a fair contract now,” Sanders added.

How did Starbucks Respond?

Starbucks downplayed the significance of its loss, referring to the votes at the three stores as a “split decision.” But the effort to organize Starbucks employees had been closely watched nationally. The company put a major effort into convincing employees that they were better off without a union, but at least in the case of one of the stores, it failed to make its case.

In a recent filing with the Securities and Exchange Commission, in a section where Starbucks lists risks to the company, the chain said that “if a significant portion of our employees were to become unionized, our labor costs could increase and our business could be negatively affected by other requirements and expectations that could increase our costs, change our employee culture, decrease our flexibility and disrupt our business.”

Starbucks is also concerned about how its efforts to defeat the union could hurt its reputation. “Our responses to any union organizing efforts could negatively impact how our brand is perceived and have adverse effects on our business, including on our financial results,” Starbucks warned in the same filing. Meanwhile, Starbucks is concerned about how its efforts to defeat the union could hurt its reputation. “Our responses to any union organizing efforts could negatively impact how our brand is perceived and have adverse effects on our business, including on our financial results,” Starbucks warned in the same filing.

Unions also placed great importance in the vote at Starbucks. But the days when unionized manufacturing jobs dominated the US economy are long past, and union membership among businesses has fallen to 6.3% of private-sector workers, down from 16.8% in 1983, the first year the Labor Department tracked union membership by industry.

It’s even lower in retail and food services business, two major employment sectors, with only 4.6% or retail workers and only 1.2% of foodservice employees belonging to a union. Winning the right to represent workers in industries with such low union membership is crucial for unions’ efforts to regain some of their past strength.

Should I buy Starbucks Stock?

Some analysts note that the unionizing move won’t have an immediate impact on Starbucks’ strategy or financial results, but if the trends were to spread, the firm would be better positioned to absorb higher costs than its industry peers.

The current consensus among 33 polled investment analysts is to buy stock in Starbucks Corp. The 28 analysts offering 12-month price forecasts for Starbucks Corp have a median target of 126.50, with a high estimate of 142.00 and a low estimate of 105.00. The median estimate represents a +8.70% increase from the last price of 116.37.

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