Fitch downgrades Starbucks

Fitch Ratings said it downgraded Starbucks Corp.’s long-term issuer default rating to BBB+ from A- and affirmed the short-term issuer default rating at F2.

The outlook is stable.

Fitch said the downgrade reflects Starbucks' aggressive change in financial policy, the third material revision within the past year, with an increased commitment to return $25 billion of cash to shareholders via dividends and share repurchases over the three-year period ending fiscal 2020 (September), up from $9 billion returned during the previous three years.

“Fitch anticipates total debt could increase by almost $10 billion by fiscal 2020 to help finance Starbucks' cash return goal given Fitch's projection of FCF before dividends of more than $8 billion over that period and roughly $5 billion of after-tax proceeds from the Nestle licensing agreement,” the agency said in a news release.

At fiscal year-end 2017, the company had $3.9 billion of total debt.

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