Following a successful supermarket test in Chicago, the Company announced its plans to roll-out Starbucks coffee to supermarkets in ten additional U.S. markets beginning early in the third fiscal quarter of 1998.
12% increase in licencees 9.4% increase in company owned stores in a 13 week period. A 65% increase in lecensee stores in the pacific rim is proposed. Something like 25% increase in company owned stores is planned for 98 in the US. There is supermarket exposure increase planned at something like 1000% by end of year.
I have been buying sbux more becouse I like the overall direction and ability to expand easily into new markets while they steadily increase earnings. The supermarkets may not support earnings for awhile but with earning increase at, "Diluted earnings per share for the first quarter of fiscal 1998 were $0.25 compared to $0.18 per share for the previous year's first quarter, a 39 percent increase.", fool me some more. Tony
I just received the annual report from SBUX. Very nice quality. Lets discuss some issues:
Gross Margin has increased due to the lower coffee prices AND the increase in the product price...good and bad.
More new stores opened than the company anticipated, which is good. But I have a serious question...how many stores are enough??? There is basically a Starbucks anywhere I go in Los Angeles...when will this new store trend saturate??? Most big US cities have Starbucks locations everywhere, but its has not fill up the rest of US smaller cities and suburban areas, as well as the rest of the world. Any opinions on how long the rapid US expansion will last, and when will the overseas expansion kick in full speed (only 17 overseas stores yet).
The supermarket channel is doing OK, slowly getting market share from PG and other lower-grade coffee/powder. As many people are still not aware of coffee is actually beans, not powder in a can.
Ice cream and bottled Frap is kicking, some of the best stuff you can get in a supermarket.
I guess SBUX's expansion are targeted towards the supermarket and overseas markets now, because SOMEDAY the US stores will be saturated. Today, 86% of total revenue are from retail stores, I am expecting the ratio to go to 70% as other businesses expand.
Concerning coffee prices, numerous people have related that to the probability of lowering earnings in this thread. However, the company has secured a large inventory of coffee beans thru contracts @ a fixed price, therefore, such worries are dumbfounded. That inventory will last until end of 1998 the least.
Not to mention the stock price of SBUX has outperformed the Nasdaq average in all years but 1997, and it beat the other restaurants/drinking establishments stocks by FAR. SBUX did not beat individual Nasdaq giants such as DELL and CSCO, but well better performed than the average.