Research archive for SBUX

Starbucks results, which we promised you yesterday. Here they are, we review the companies fourth quarter release. That is available on their IR site: Starbucks Q4 EPS Rises 37% to a Record $0.63 Per Share. Everyone I know loves coffee. I often say that it is the only legal daytime drug that nobody frowns at just yet. The bean originated in Ethiopia. No wonder they run so fast, those Ethiopians! One of the most legendary companies from yesteryear, the Dutch East India Company, was the first commercial business to import the product into Europe heavily. And the rest, as they say in the classics, is history. Coffee struggled against tea in Britain, but across Europe and much of North America, coffee consumption and finding your favourite brew has reached obsessive levels. And that is why companies like Starbucks have benefitted.

A couple of day's back we received 3rd quarter results form Starbucks who have been performing exceptionally well. What is even more impressive is that this performance is during a period when competitors like McDonalds and Yum! Brands have been struggling. The share price has followed suit growing 30.3% so far this year which includes a 7% boost on the day of this release. The stock has increased 52.62% in 1 year and a phenomenal 402% in 5 years. Very nice, but are you too late if you have not bought yet? Let's have a look.

What does a siren with a crown, two fish tails, long hair and your favourite morning brew have in common? Starbucks. A company founded in 1971 in Seattle. Their first shop was in Pike Place Market, next year the company plans to have 20 thousand shops across all six continents that you could have customers. Ironically, the continent that their brew might be most appreciated, Antarctica, does not have any stores. Just to show you how quickly their home market continues to grow, Starbucks plan to open 3000 new stores in the Americas alone. The source of the Sleeplessness in Seattle of both Tom Hanks and Meg Ryan might well have been too many lattes or espressos from Starbucks. Maybe. I can't remember how the movie plot runs, but I remember that the end is all too familiar with movies of this nature. Boy gets girl, girl gets boy. The end. No story of him leaving the toilet seat up and her forgetting that the big match is on this weekend. None of that.

Earnings season has brought us another set of numbers, this time from Starbucks who have been a lot more resilient than the other fast food/drink type businesses. The numbers were for their fiscal first quarter. Here are the financial highlights: Net revenues increased 11% to a record $3.8bn. Comparable store sales increased 6%, regionally the company saw 7% in the US, 11% in China and -1% in Europe. Importantly margins increased by 40 basis points to 16.6% thanks to a drop in the coffee price. This all amounted to an EPS increase of 14% to 57c. 212 new stores were opened globally including 3 stores in India (in my last message about Starbucks I mentioned that the queues at the Mumbai Starbucks were so long that hawkers were selling tea to the people waiting in the queue).

This is a day or two old, but we need to take a look at the recent Starbucks transaction. They bought a tea company. You could have seen it coming with the company dropping the "coffee" part from their logo. In fact, if you read this Bloomberg piece: Starbucks With Teavana Moves Schultz Beyond Coffee Roots, you can see the diversification path was set out a long time ago. Tea shops? I suppose culturally there are as many people who enjoy tea as they do coffee. Tea is an art form in the East. In Japan, China and Korea there are all specifics with regards to the ins and outs of tea drinking and preparation. If I drink tea, it is normally Rooibos. At University though I drank tea. A lot of tea. Too much tea. Perhaps Starbucks can mesh the two cultures together, Tea seems so ballet whilst coffee seems heavy metal at times. Perhaps somewhere in the middle.

One of our aspirational stocks in New York released very good looking numbers yesterday. Starbucks comfortably beat expectations sending the stock up 7.5% after the close. It's been a bumpy road for these guys over the last few months as big consumer stocks with exposure to China started pulling back at the beginning of October. Now that things are looking better in both China and the US these stocks have inevitably started to pick up again.

One of the companies that falls nicely within our aspirational consumer theme reported quarterly earnings on Friday. You know, picking up a big coffee and muffin from Starbucks before work is very cool and very New York, well for many of us in the developing world at least. And this is why first quarter earnings rose 10% to bring in record sales from their traditional operations in the US along with robust growth from the smaller Asian operations.

We had numbers from a company we all know about but unfortunately do not have much access to here in South Africa. I'm talking about Starbucks, the huge coffee retailer. There is more than meets the eye with this company who also purchases high quality whole bean coffees, roasts them and sells them.