Starbucks will reduce production at its U.S. coffee plants to a five-day week starting in January. CEO Brian Niccol is implementing this change to cut costs due to falling demand in the U.S. The company’s five coffee roasting and packaging facilities in the U.S. will shift from a seven-day to a five-day weekly production schedule. This decision is part of a larger strategy to cut costs and reinvest as Starbucks faces a decline in demand for its more expensive drinks. Along with lowering production, Starbucks will limit annual raises for salaried employees in North America to 2%. The savings gained from these changes will be used to enhance stores and improve customer experience while dealing with slowing sales. Starbucks moving to a five-day production schedule raises concerns about U.S. demand. This, along with the capped raises, indicates that management expects soft sales to continue into 2026. For investors, this suggests a cautious outlook for the company’s stock in the upcoming weeks. This trend follows broader economic patterns, as data from the Bureau of Economic Analysis for July 2025 showed a slight decline in real discretionary spending. Additionally, Starbucks’ stock has underperformed the S&P 500 by about 4% this year, reflecting weaker consumer sentiment. The production cut reinforces concerns about the market for higher-priced items. Investors might consider buying put options to protect against or speculate on further declines. Look for expiration dates between October 2025 and January 2026 to capture market sentiment around the next earnings report and these production cuts. These put options could increase in value if Starbucks’ future guidance worsens. We can expect an increase in the stock’s implied volatility soon. This means options prices will rise as traders account for a wider range of potential outcomes. Strategies like debit put spreads could help manage some of these rising costs while keeping a bearish stance. This situation contrasts with the growth narrative from 2022 and 2023 after Howard Schultz returned to the company. That time was focused on growth investments, while the current approach is about safeguarding margins. Historically, similar consumer companies that announced production cuts before a potential downturn faced challenges in their stocks over the next two quarters. However, some may view this move as essential for improving profitability. If these cost-cutting measures are seen as a proactive way to boost margins, they could create a price floor for the stock. Selling cash-secured puts at a lower strike price could be a strategy for investors looking to benefit from a potential long-term positive outcome.

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