Starbucks boycott bites as investors advised to sell Berjaya Food shares

 

RHB Bank has advised investors to sell their shares in Berjaya Food, owner of the Starbucks franchise in Malaysia, as a longer-than-expected boycott has hit revenues hard. (Starbucks pic)

PETALING JAYA: An ongoing boycott of popular food and beverage chain Starbucks has led RHB Bank to issue a research note advising investors to sell their shares in franchise owner Berjaya Food, with the bank pointing to a 24% slide in stock price.

“Our outlook for Berjaya Foods has turned cautious, and the ongoing Starbucks Coffee boycott could last longer than we initially expected if there is no near-term resolution to the Israel-Hamas conflict.

“Also, the post-boycott recovery may not be straightforward and it may take Berjaya Food much effort to regain its market share, in view of the intense competition,” the bank said in its note sighted by FMT, adding that the stock price has dropped to 46 sen a share, down from 73 sen.

RHB said it had visited outlets and noted a 30% to 40% fall in foot traffic, despite otherwise busy shopping malls and no similar downward trend at Starbucks’s competitors.

“This situation is worse than expected, the timing of this boycott is inopportune, since the year end normally constitutes a seasonal peak period,” the note said, adding that Starbucks’s “cosy” experience was something its competitors had tried to emulate and some might capitalise on this during and even after the boycott.

RHB also said customers continuing to shun its stores could impact the chain’s expansion plans, as it had slated 40 to 50 new store openings in the coming financial year.

The bank also predicted a steady erosion of net profits for Berjaya Food from 21% in 2024 to 7% in 2026.

The downtrend comes on the back of news from New York yesterday that Starbucks Corp shares suffered a record run of losses with growing concern that sales trends at the coffee giant have cooled in recent weeks.

The stock dropped 1.6% on Monday, declining for an 11th consecutive session in what is the longest rout since Starbucks’s public debut in 1992. In total, the slump has erased 9.4% of Starbucks’s market value, a decline of nearly US$12 billion.

Berjaya Food owns and operates Starbucks, a shariah-compliant franchise, in Malaysia. Starbucks is one of a number of US-based chains, including McDonalds and Burger King, that has been targeted for boycott by Malaysians outraged at perceived links to, or support of, Israel and its military campaign in Gaza. - FMT