What Starbucks tells us about the US economy

Synopsis

Starbucks, the world's largest coffee chain, serves as a key indicator of the US economy. Recently, the company announces it cannot maintain its previous growth rate into 2020, primarily due to the expiration of the Trump tax cuts. This change impacts their earnings per share, which previously saw a 10 percent year-on-year growth. In response, Starbucks initiates share buybacks, pulling forward plans originally set for 2020. This strategy reflects a broader trend in corporate America, where companies issue cheap debt to buy back shares, artificially inflating stock prices. Despite the high stock valuations in the US, Starbucks indicates that the US consumer remains resilient, although the reliance on share buybacks raises concerns about genuine growth prospects.