MW Why Starbucks' expensive revamp might not win over a younger crowd

By Bill Peters

RBC analysts say that Starbucks' efforts to add comfier seats might not work with younger shoppers going to drive-thru chains like Dutch Bros

Starbucks has been dealing with competition from smaller chains like Dutch Bros and 7 Brew.

As Starbucks tries to win back investors and consumers amid steeper competition, RBC Capital analysts believe Wall Street's expectations for the coffee chain are too high and say that the company is spending more than they thought it would on its turnaround efforts.

Moreover, they argue, as Starbucks spends more money to make its stores more welcoming, younger consumers might not even care.

With all that in mind, RBC downgraded Starbucks' stock $(SBUX)$ to its version of a hold rating, from a buy. Shares fell 2.2% in midday trading on Wednesday and have dropped 6% amid a five-day losing streak that started after they closed at a one-year high on March 11.

The analysts, led by Logan Reich, said that when they started covering the company in 2024, they initially expected Starbucks' reinvestments in the business to be small and temporary. But in the months that followed, things didn't exactly go that way.

"Investment in the business is larger than we previously expected and there's lack of visibility on cost savings hence margin improvements," they wrote in a note to clients.

"Investor top-line growth expectations are elevated, leaving less room for upside," they added.

The downgrade of the stock comes as Starbucks has been trying to improve staffing and service, streamline ordering and make its coffee shops warmer and more inviting, after customers got turned off by higher prices and sought out smaller rivals like Dutch Bros (BROS) and 7 Brew, which offer energy drinks and more customizable options. Starbucks has also added things like protein and cold foam to its menus.

In January, in connection with its investor day, Starbucks laid out longer-term financial targets for investors, as it tries to chart the course for a bigger rebound. For its fiscal 2028, which runs roughly through September, management said it expects same-store sales growth of at least 3% in the U.S. and globally, with adjusted operating margin of 13.5% to 15% and more than 2,000 new stores overall.

Starbucks said in January that it has invested more than $500 million in labor. But it also has plans to deliver at least $2 billion in cost cuts from around 90 separate initiatives - such as rethinking how it gets its ingredients - over the next few years.

The RBC analysts said that the same-store sales target was doable. But they argued that with so many smaller pathways to cutting costs, as opposed to a handful of larger ones, it was harder to calculate the ways those cuts might boost margins.

Starbucks' revamped loyalty program, they said, had gotten mixed reactions from some consumers. And they said that efforts to offer things like comfier seats and ceramic mugs in its coffee shops might not attract younger customers.

"Given the success of drive-through chains like aforementioned Dutch Bros & 7 Brew, particularly with Gen Z, it's not entirely clear that making [Starbucks] stores more welcoming/enticing for sit-in customers will resonate with younger consumers," they wrote.

Despite Wednesday's weakness, shares of Starbucks have rallied 13.3% so far this year, while Dutch Bros' stock has dropped 16% and the S&P 500 index SPX has slipped 2.5%.

-Bill Peters

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March 18, 2026 12:55 ET (16:55 GMT)

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