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$11.08 0.07 (0.64%)
10/10/2008 4:00 PM

Starbucks Corp (SBUX)

CAPS Rating:
**

Purchases and roasts high-quality whole bean coffees and sells them, along with fresh, rich-brewed coffees, Italian-style espresso beverages, cold blended beverages, coffee-related accessories and equipment primarily through its operated retail stores.

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Avatar NetscribeRetail (80.57) Submitted: 12/22/06 4:45 AM : Outperform Start Price: $36.36 SBUX Score: -32.01

Starbucks is the largest specialty coffee store in US with over 12000 stores worldwide. Of this roughly 8500 exists in US and the rest spread across 37 different countries. It is market leader in terms of both market share and number of company owned retail stores. Apart from that Starbucks also has the unique distinction of having the highest customer frequency among all retailers.

The coffee retailing industry is highly fragmented with competition from players like restaurants, specialty coffee shops, and doughnut shops apart from other specialty coffee retailers. Even with such tough competition, this company is the market leader because of favorable factors like coffee quality and convenient location, friendly and knowledgeable staff and variety of products offered.

The outlook looks good with the company is planning to expand massively into both domestic and international markets. The company is also planning to acquire 40 stores of diedrich coffee, one of its competitors. These factors will fuel the earnings further as new store openings and increasing comparable store sales are the two main revenue drivers in this industry.

Also the new endevour of the company, Warming Platform – offering hot breakfast sandwiches – has met with good success and will be extended to more locations. The company is also planning to enter into alternate delivery channels like supermarkets for its packaged drinking products. This should considerably help in increasing sales, as the awareness level of the company is as high as 83%. All these factors make the stock attractive and we think the stock will continue moving northward in the coming fiscal too.

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Avatar NetscribeRetail (80.57) Submitted: 5/28/07 6:58 AM

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Pleased with the strength of its business as reflected by a solid revenue growth and extensive store expansion, Starbucks continues to build a solid global foundation. This will enable it to realize the tremendous growth opportunities available in a more challenging cost environment and broaden its top-line.

For the recent quarter, company’s revenues rose by a decent 19.6% to $2.26 billion largely attributed to higher retail sales emanating from opening up of new stores. The net income which was victim of competitive environment rose 18.5% to $150.8 million, partially offset by increase in cost of sales, higher depreciation expenses and increased store operating costs. Starbucks has realized the growth opportunities outside the U.S. and hence increased its operations globally. While international revenue of around $387 million is currently a smaller piece of the total revenues, it is the growth rate of 30% which looks attractive. Besides in order to increase its top-line, the company is aggressively increasing its store count which is evident by 560 additions during the last quarter.

The company further plans to open 2,400 new stores on a global basis in fiscal 2007 which includes 300 company-operated stores and 400 licensed stores in international markets. Thus it proves the company’s strategy to expand its operation all over the globe taking advantage of the growth prospects in China and new emerging markets, such as Brazil, Egypt, India, and Russia. Starbucks is targeting total net revenue growth of approx 20% for fiscal 2007 while comparable store sales growth remains in the target range of 3 to 7%. Besides EPS is anticipated in the range of $0.87 - $0.89. The company appears to know its road to progress perfectly fine and has done it significantly well. Also its shares have come down by around 19% year-to-date, which makes it a prospective buy at current levels.

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