Starbucks Corp. (SBUX) has faced a recent stock downgrade by analysts as the company deals with ongoing lawsuits, leadership changes, and activist pressure, which have impacted its near-term outlook.
In a recent report, analysts downgraded Starbucks’ stock, citing concerns about the company’s ability to execute its turnaround strategy. According to reports from Yahoo Finance and Morningstar, the downgrade reflects uncertainty about Starbucks’ short-term recovery, with analysts suggesting that the company will need more time to address its operational challenges and stabilize performance.
Starbucks recently replaced its CEO, following pressure from activist investors. The new leadership, CEO Brian Niccol, will address declining sales and a series of legal challenges. The transition has raised questions about the company’s ability to execute its turnaround plan, a key factor in the recent stock downgrade.
In addition, Starbucks is involved in multiple current lawsuits. One of the most prominent is a class-action lawsuit alleging that Starbucks executives misled investors about the company’s financial outlook during fiscal years 2023 and 2024.
The lawsuit claims that while executives expressed confidence in the company’s reinvention and diversification strategies, they failed to disclose significant challenges related to global expansion, same-store sales, and innovation in foreign markets. When these issues were eventually revealed, shareholders reportedly suffered substantial financial losses.
Another active legal case involves a dispute with Bodum, a well-known kitchenware company, over a patent infringement and contract breach related to the sale of French presses. Bodum has accused Starbucks of violating an exclusive supplier agreement and infringing on its patented design for a plunger-filter coffeemaker. The lawsuit, filed in the U.S. District Court for the Northern District of Illinois, seeks damages and injunctive relief. Starbucks has denied the allegations and plans to defend itself in court.
Beyond legal battles, Starbucks recently received the lowest possible rating from Ethical Consumer, a watchdog organization that monitors corporate social responsibility, on their supply chain practices. Ethical Consumer’s report highlighted significant concerns about human rights and labor practices within Starbucks’ supply chain, including allegations of poor working conditions and inadequate wages for workers in various parts of the world.