Starbucks Corp.

The negative outlook reflects the risk of a downgrade if the recovery in Starbucks performance is delayed due to COVID-19 hindering its ability to strengthen credit metrics to appropriate levels for the current rating. We could lower the rating if we no longer expect leverage will return to about 3x by the end of calendar 2021. This could occur if: The COVID-19-related disruption extends longer than we anticipate. The recessionary environment persists into 2021, resulting in weaker consumer spending that reduces cash-flow and profitability improvements. Management resumes share repurchases before significantly reducing debt to return leverage to appropriate levels for the rating. We could revise the outlook to stable if the company is on track to return adjusted leverage to

...Starbucks' operating performance continues to recover, but near-term risks are elevated. Global comparable-store sales declined 9% in the company's fiscal fourth quarter (ended on Sept. 27, 2020) as the effects of the COVID-19 pandemic continued to stifle customer traffic. However, sales did improve throughout the quarter as more stores reopened, drive-through efficiency increased, cafT seating capacity grew, and customers embraced its seasonal fall beverage offerings. In the U.S., the company's largest-market, comparable-store sales strengthened to a 4% decline in September from a 14% drop in July, with approximately 97% of company-operated stores open. Subsequently, after slightly improving in October, comparable store sales have decelerated in November and December due to rising COVID-19 cases. We still expect comparable-store sales to rebound significantly in fiscal 2021, led by higher traffic. While the approval of a number of vaccines is a positive development, these approvals are...

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