5 More Reasons for Me to Buy Stock in Starbucks
Dec 6th 2012 7:00PM
Updated Dec 6th 2012 7:06PM
A little over a week ago, I wrote about why I had just purchased shares in Starbucks , the main reason being the food-and-beverage retailer's long-term performance potential, blended with its genuine commitment to social responsibility. Well, just in case the potential for long-term performance wasn't quite good enough (it was), Starbucks has just given me five more reasons to invest -- all part of an assertive plan designed to drive growth globally across both its consumer-packaged goods and retail channels.
Five initiatives to rule them all
Starbucks just announced the plan at its biennial Investor Conference, being held today in New York. The highlights of the plan are as follows:
1. Open 3000-plus net new Starbucks cafes in the Americas by 2017, with more than half of those in the U.S. market.
2. Renovate thousands more stores, which I'm happy to hear. While I never walk into a Starbucks and think, "What a dump," some of the stores are starting to look a bit overused around the edges. This is a good move.
3. Double its international consumer-packaged goods footprint by 2015. Cafes are all well and good, and form the heart of Starbucks' business model, but there's nothing wrong with devotees being able to get the company's coffee for their at-home fix while they're at the supermarket, and already in the buying mood.
4. This is more of an announcement rather than an initiative, but China is on track to become Starbucks' second largest market sometime in 2014. John Culver, president of Starbucks China and Asia-Pacific, said of his region:
The company's fastest growing retail-store market will approach 4,000 stores by the end of 2013, including 1,000 in mainland China, 1,000 in Japan, 500 in Korea, and its first store in Vietnam.
That's the kind of emerging-market growth that's hard to argue with.
5. Finally, this is old news, but it's good to hear again: Starbucks is reiterating it's commitment to buy Teavana this year, which will put Starbucks on track for a potential leadership position in the $40 billion global tea market. I personally love tea. Apparently, so do a lot of other people.
Still growing strong
While we're here, let's have a quick look to see how Starbucks shapes up against the competition on a few basic, but telling, metrics.
- Revenue growth: In its most recent quarter, Starbucks grew its revenue by a very healthy 11% year over year, versus Dunkin Brands 5%, Yum! Brands 9%, and McDonald's -0.2%.
- Earnings: Starbucks YOY earnings were just a little better than flat in the most recent quarter, at 0.1% growth. That isn't great, but McDonald's managed only 3.5%. It's a tough world economy out there.
- Cash versus debt: Finally, it's always good to have more cash than debt, ideally, at least 1.5 times more, which, with $2 billion in cash, and $550 million in debt, Starbuck's easily achieves. With $166 million in cash, and $1.9 billion in debt, Dunkin is well below that benchmark. McDonald's and Yum! Brands follow in Dunkin's footsteps in this regard.
Onward and upward with Howard
According to Starbucks star CEO Howard Schultz:
Starbucks business and brand have never been healthier, and as a company we have never been better positioned to execute against our global, multi-channel growth agenda.
If this kind of statement came from almost any other CEO, I would write it off as corporate blather. I mean, what else is a CEO supposed to say? "Hey, our company has never been in more trouble, and we've never been more poorly positioned to execute our grand plan?" But, coming from Howard, and knowing what I know about the company and where's it's headed, a line like that actually means something.
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The article 5 More Reasons for Me to Buy Stock in Starbucks originally appeared on Fool.com.Fool contributor John Grgurich owns shares of Starbucks. Follow John's dispatches from the bleeding edge of capitalism on Twitter @TMFGrgurich . The Motley Fool owns shares of McDonald's Corporation S. The Fool owns shares of and has written puts on Starbucks. Motley Fool newsletter services have recommended buying shares of McDonald's Corporation S and Starbucks. Motley Fool newsletter services have recommended creating a bull call spread position in McDonald's Corporation S. Motley Fool newsletter services have recommended writing covered calls on Starbucks.The Motley Fool has a delightful disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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