Starbucks Corporation SBUX has hit a major expansion milestone by opening its 30,000th store in Shenzhen, China.
The new store, the Starbucks Reserve Shenzhen Bay Mix City location, in Starbucks’ fastest-growing market is a tribute to the company’s coffee leadership around the world.
Global Expansion on Track
Expansion has been one of the most important growth strategies for this coffee giant. Management focuses on increasing its global market share by judiciously opening stores in new and prevailing markets, remodeling existing stores, deploying technology, controlling costs, and aggressive product innovation and brand building.
China has been the fastest-growing market for Starbucks. Management has a strong belief that China will drive more meaningful business growth over the next five years, supported by rapid unit expansion, wider brand awareness and increased usage of digital/mobile/loyalty platforms, while respecting local heritage.
Starbucks, which opened its first location in 1971 in Seattle, operates in 78 markets around the world and has plans to open 600 net new stores annually in Mainland China, which will double the market's store count to 6,000 across 230 cities by 2023 from the figure recorded at fiscal 2017-end. In first-quarter fiscal 2019, the company opened 259 stores in China.
At the China-Asia-Pacific segment, net revenues increased 45% year over year to $1.2 billion in first-quarter fiscal 2019. The upside can be attributed to increased sales from ownership change in East China, 1,010 new store openings over the past 12 months and improved comparable store sales.
Starbucks aims at increasing its retail store portfolio, including a variety of different formats, by 6-7% net new units annually. There are now three Starbucks Reserve Roasteries that have opened in Milan, Italy, New York City, and Tokyo, Japan.
Additionally, in October 2018, Starbucks opened its first Deaf-friendly sign language store in the United States (second globally) in Washington, DC. The store format is a distinctive retail experience that promotes accessibility, and offers employment and career advancement opportunities for Deaf or hard-of-hearing people.
Starbucks' New Rewards Program
Starbucks announced plans to revamp its North American loyalty program in a bid to continue membership growth and gain a competitive advantage. Effective Apr 16, 2019, Starbucks Rewards loyalty program is getting a makeover, enabling members to earn rewards points and utilize the same to buy more items than before.
The company holds a leading position in digital, card, loyalty and mobile capabilities. Its loyalty cards are gaining significant popularity. In the United States, the company’s membership increased 14% year over year to 16.3 million active members in first-quarter fiscal 2019.
In the past three months, this Zacks Rank #2 (Buy) company’s shares have gained 13.9%, outperforming its industry’s growth of 12.5%. The company’s operating fundamentals such as solid global footprint, successful innovations, best-in-class loyalty program and digital offerings are encouraging.
Other Key Picks
Other top-ranked stocks from the same space include Good Times Restaurants Inc. GTIM, Darden Restaurants, Inc. DRI and Brinker International, Inc. EAT. While Good Times Restaurants sports a Zacks Rank #1 (Strong Buy), both Darden Restaurants and Brinker carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Good Times Restaurants has an impressive long-term earnings growth rate of 30%.
Darden Restaurants and Brinker’s earnings for the current year are expected to increase 18.3% and 10%, respectively.
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