Case

Starbucks and forecasting through COVID-19

On 8 April 2020 Starbucks withdrew its full-year guidance because it could not estimate the pandemic's effect with reasonable accuracy. In Q4 of fiscal 2020 in the US, comparable transactions fell 25%, average ticket rose 21% and comparable sales fell 9%. The company later restored guidance: fiscal 2021 operating margin was guided at 14–15% and came in at 16.8%; fiscal 2022 was 14.3%.

Industry
Coffee chains (consumer foodservice)
Frameworks applied
Scenario planningChoosing a forecasting methodRolling forecast cycleChecklist of forecasting biasesCapital budgeting techniques
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Frameworks applied

This case is read through the frameworks below.

  • Scenario planningBefore committing to a long-term investment in a volatile industry, which plausible futures should the leadership team test its strategy against to see if it holds?
  • Choosing a forecasting methodWhen a manager must forecast sales or demand, should they rely on expert judgement, quantitative models, or a combination of both?
  • Rolling forecast cycleWhen volatile costs, prices or exchange rates make the annual budget outdated, how should a CFO re-forecast each quarter and track monthly variances?
  • Checklist of forecasting biasesBefore presenting a sales, cost or project timeline forecast, which psychological biases should a manager check for to avoid over-optimism or over-confidence?
  • Capital budgeting techniquesWhen a CFO must choose between long-term investment projects, should NPV, IRR, payback or the profitability index decide, and where can each one mislead?

Sources

References

Listed A–Z by author surname, Harvard style. A source with a DOI links to https://doi.org/…; one without links to its page or says plainly that it has no DOI.

  1. Starbucks Corporation (2019) Starbucks reports Q4 and full year fiscal 2019 results (30 October). SEC EDGAR, Exhibit 99.1 (Press release).No DOIsec.govSource page
  2. Starbucks Corporation (2020) Business update (8 April). SEC EDGAR, Exhibit 99.1 (Press release).No DOIsec.govSource page
  3. Starbucks Corporation (2020) Starbucks reports Q2 fiscal 2020 results (28 April). SEC EDGAR, Exhibit 99.1 (Press release).No DOIsec.govSource page
  4. Starbucks Corporation (2020) Starbucks reports Q3 fiscal 2020 results (28 July). SEC EDGAR, Exhibit 99.1 (Press release).No DOIsec.govSource page
  5. Starbucks Corporation (2020) Starbucks reports Q4 fiscal 2020 results (29 October). SEC EDGAR, Exhibit 99.1 (Press release).No DOIsec.govSource page
  6. Starbucks Corporation (2021) Starbucks reports Q4 fiscal 2021 results (28 October). SEC EDGAR, Exhibit 99.1 (Press release).No DOIsec.govSource page
  7. Starbucks Corporation (2022) Starbucks reports Q4 and full fiscal year 2022 results (3 November). SEC EDGAR, Exhibit 99.1 (Press release).No DOIsec.govSource page