Moody’s Investors Service upgrades Starbucks

Moody's Investors Service has upgraded Starbucks senior unsecured ratings to A2 from A3.

Short-term commercial paper rating was also upgraded to Prime-1 from Prime-2, and senior unsecured shelf to (P)A2 from (P)A3.

“Starbucks measured growth strategy, product pipeline, digital initiatives and balanced financial policy will continue to drive operating earnings, credit metrics, liquidity and scale that is more reflective of an A2 rating,” said Moody's Senior Credit Officer Bill Fahy.

“Various product offerings and digital initiatives have driven strong operating metrics and earnings which along with a reduction in adjusted debt levels due to changes in Moody's approach for capitalizing operating leases has resulted in significantly stronger credit metrics.”

According to Moody’s, the A2 senior unsecured rating reflects Starbucks global brand strength, dominant position in the U.S. specialty coffee segment, global diversification, significant scale, and balanced financial policy. The ratings are also driven by Starbucks strong and consistent operating trends driven in-part by new product offerings, greater day part diversity, well accepted loyalty program and ecommerce initiatives that have resulted in strong credit metrics and excellent liquidity.

In addition, Moody’s indicates Starbucks rating outlook is stable, a reflection of the investors service’s view that “a steady pipeline of new innovative products, enhanced digital initiatives, an engaged employee base and disciplined restaurant growth both in the U.S. and internationally should continue to strengthen the Starbucks brand and drive further improvement in earnings, cash flows, and debt protection metrics.”