Starbucks. Coffee. Fix. Tasty numbers.

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.

Coffee is not its only product with a selection of premium teas, complementary food items, cold blended beverages and beverage related accessories and equipment. It falls under the investment theme we like to call aspirational consumerism. People, especially in developing nations, strive to improve their lives so that they can sit down in a Starbucks, drink a coffee and read the newspaper (or should I say iPad).

The numbers looked good as profits rose 34% from the previous comparable quarter. Revenue came in at $2.9bn beating estimates comfortably, producing earnings of $279 mil or 36c a share. The company said that they are expecting earnings of $1.50 for the year. The share trades at $40 so looking quite pricey at a PE of 27. Why so high? The outlook looks very rosy with targeted earnings per share growth of 15-20% for 2012 have being given by management. Same store sales grew 8% but it's their expansion into developing markets which is really exciting investors. They look to open up 800 new stores next year on top of their 17 000 in 50 countries. 11 000 thousand of those are in the US. You can see why there is a drive to diversify internationally.

The company does face headwinds. Commodities, including the price of coffee, are getting more expensive. The margins in coffee are huge (gross margins of 57.5%) so the company will want to keep that advantage. In fact they have been very innovative in fighting this issue. Because they have had to increase coffee prices they have focused heavily on enhancing the visitor experience. This has resulted in customers visiting more often and staying for longer. This innovation includes various loyalty programmes and a new mobile payment system. I love companies facing obstacles head on and thinking out of the box. In fact CFO Troy Alstead said that if he were to judge the economy by customers coming in he'd say the economy was great. Encouraging signs.

We like the company, we like the margins and we like the fact that they target China to be their largest market outside of the US.