Articles for Starbucks

Starbucks’ Asian Growth Faces A Tough Road Ahead

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Wednesday, May 16th, 2012 by Trefis Team

It would be wrong to assume that Starbucks Corporation‘s (NASDAQ:SBUX) expansion in Asia would be a runaway success without any obstacles as pricing issues combined with intense competition can pose a threat to the company’s long term profitability. Moreover, these factors will impact long term trends for the business, which we rely on to make long term estimates for its valuation. Starbucks has outperformed the markets in 2012 but has lost more than 10% since reaching its record high in April. Starbucks’ competitors in the broader market for coffee include McDonald’s (NYSE:MCD), Caribou Coffee (NASDAQ:CBOU) and Dunkin’ Brands (NASDAQ:DNKN).

We have a Trefis price estimate of $55 for Starbucks, which is in line with the market price.

See full analysis for Starbucks here

Pricing Issues

In South Korea, Starbucks increased the prices of its 32 drinks by 300 Won or $0.27 from May 7. The move was unpopular in the country and it has faced consumer backlash.

The company also plans to double the number of restaurants in the country to 700 by the end of 2016. Unlike most of its western counterparts, the menu prices of Starbucks in developing markets are on par with (or sometimes even more expensive) those in the U.S. Pricing is a major issue, especially in developing markets, since they exhibit a higher negative price elasticity. In other words, a slight price increase will deter a significant number of customers. With prices of its drinks already higher than most of its competitors, there isn’t much scope to raise prices.

Competition Heats Up

In India, Dunkin’ Brands opened its first Dunkin’ Donuts outlet recently and plans to add another 100 in the next five years. Apart from possessing the first mover advantage, Dunkin’ Donuts also benefits from its relatively lower priced menu. The coffee chain has also added items such as mango milkshakes and mango doughnuts to cater to the tastes of local Indian population. It will be interesting to see what amendments Starbucks makes to its menu when it opens its first restaurant in the country in August this year. Besides Dunkin’ Donuts, Starbucks has to compete against the already established players such as Costa Coffee, Cafe Coffee Day and Barista. Starbucks plans to add around 50 restaurants in India in the next few years.

We recently wrote an article on areas where Starbucks can potentially falter in China.

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Don’t Get Excited About Starbucks’ Chinese Expansion Just Yet

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Friday, May 4th, 2012 by Trefis Team

Starbucks Corporation (NASDAQ:SBUX) recently announced its plan to accelerate the store openings in China to 1,500 by the end of 2015. The coffee chain currently has 570 outlets in the country. Besides China, Starbucks will also double the number of stores in Korea to 700 by 2016. The stock had gone to as high as $61.60 in mid-April before declining to $56.60 since. We believe the correction was called for as the stock had started to drift away from fundamentals.

Moreover, there are a few factors you need to consider which might prevent the script from going perfectly for Starbucks. Its competitors in the broader market for coffee include McDonald’s (NYSE:MCD), Caribou Coffee (NASDAQ:CBOU) and Dunkin’ Brands (NASDAQ:DNKN).

The Best Dividends On May 07, 2012

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Friday, May 4th, 2012 by Trefis Team

Submitted by Dividend Yield as part of our contributors program.

Here is a current overview of the best yielding stocks with a market capitalization over USD 2 billion that have their ex-dividend date on the next trading day. If your broker settles your trade today, you will receive the next dividend. A full list of all stocks with ex-dividend date can be found here: Ex-Dividend Stocks May 07, 2012. In total, 25 stocks and preferred shares go ex-dividend of which 8 yielding above 3 percent. The average yield amounts to 2.37 percent.

The ex-dividend date is a major date related to the payment of dividends. If you purchase a stock on its ex-dividend date or later, you will not receive the next dividend payment. Instead, the seller gets the dividend. If you purchase before the ex-dividend date, you get the dividend. It is important that your broker settles your trade before the ex-dividend date.

Starbucks Brews Up Solid Growth In Asia-Pacific And Americas

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Monday, April 30th, 2012 by Trefis Team

Starbucks Corporation (NASDAQ:SBUX) announced its Q2 earnings on Thursday. Revenues jumped 15% to $3.2 billion on a y-o-y basis helped by a 57% increased in channel development revenues. Operating profit witnessed a slight improvement as declines in store operating expenses (as a percentage of revenues) were negatively offset by an increase in store operating expenses. Net income stood at $309.9 million, or 40 cents a share compared to 34 cents a share in Q2 2011.

The company even raised the full year EPS guidance to $1.81 to $1.84 per share. Starbucks’ competitors in the broader market for coffee include McDonald’s (NYSE:MCD), Caribou Coffee (NASDAQ:CBOU) and Dunkin’ Brands (NASDAQ:DNKN). We have a Trefis price estimate of $55 for Starbucks, which is around 5% below the current market price.

Starbucks’ New Products Can Jolt Earnings Thursday

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Thursday, April 26th, 2012 by Trefis Team

Starbucks Corporation (NASDAQ:SBUX) is set to announce its Q2 earnings on Thursday. This was an exciting quarter for Starbucks as the company introduced it much awaited Blonde Roast as well as opened the first juice bar Evolution Fresh, named after the juice company it acquired in 2011.

Apart from increased presence in Asia/Pacific, its global consumer products (CPG) is turning out to be a significant revenue growth driver. The stock has has surged more than 30% in 2012 itself, making it one of the best performing stocks on NASDAQ. Starbucks’ competitors in the broader market for coffee include McDonald’s (NYSE:MCD), Caribou Coffee (NASDAQ:CBOU) and Dunkin’ Brands (NASDAQ:DNKN).

We have a Trefis price estimate of $52 for Starbucks, which is around 10% below the current market price.

Starbucks Brews Up Impressive Earnings But Falling Margins a Worry

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Wednesday, February 1st, 2012 by Trefis Team

Starbucks (NASDAQ:SBUX) delivered strong results last week on the back of strong revenue growth. The company changed its reporting format from this quarter to include the results of China & Asia Pacific (CAP), Americas and Europe, Russia, Middle East and Africa (EMEA) separately. Total revenue grew by 16% to $3.44 billion, compared to the same quarter previous year. Revenue growth was partially helped by the addition of Evolution Fresh and the conversion of some of the outlets in Europe which were running as joint ventures to company-owned outlets and recognizing full revenue from packaged coffee and tea sales under the direct distribution model. The company posted a net income of $382 million or 50 cents a share up more than 10%. Starbucks’ competitors in the broader market for coffee include McDonald’s (NYSE:MCD), Caribou Coffee (NASDAQ:CBOU) and Dunkin’ Brands (NASDAQ:DNKN).

Starbucks Expands into the Land of Tea

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Friday, January 27th, 2012 by Trefis Team

Submitted by Charles Sizemore at Sizemore Investment Letter as part of our contributors program

If there has been one recurring theme in my investment recommendations over the past two years, it is this: If you want growth, you have to look to emerging markets. With the United States, Europe and Japan burdened with high levels of debt and aging demographics, growth in the developed world will be hard to come by. But in markets like China, Brazil and Turkey, living standards are rising and a new middle class is rising. This is a long-term investment theme that is ripe for the picking.

Starbucks Earning Preview: What We Are Watching

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Friday, January 20th, 2012 by Trefis Team

Starbucks (NASDAQ:SBUX) will announce its Q1 earnings January 26. It has altered its reporting format and will be reporting results separately for China and Asia Pacific (CAP), Americas region and Europe, Russia, Middle East and Africa (EMEA). The stock gained close to 10% last quarter alone. Starbucks’ competitors in the broader market for coffee include McDonald’s (NYSE:MCD), Caribou Coffee (NASDAQ:CBOU) and Dunkin’ Brands (NASDAQ:DNKN). We feel that the current rally is fueled by its recent record of better-than-expected results, but we think the stock is fundamentally extended. Let’s look at a couple of factors which can potentially put the company in a precarious position.

Our price estimate for Starbucks is about $40, which is about 15% below the current market price.

Don’t Get Excited About Starbucks Rushing Into India Just Yet

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Thursday, January 12th, 2012 by Trefis Team

The Indian government finally allowed 100% FDI in a single retail brand which could see Starbucks entering the country soon. Earlier in 2011, Starbucks (NASDAQ:SBUX) had signed a Memorandum of Understanding (MoU) with India’s Tata Coffee Ltd to source coffee beans and consider opening stores in the country. Until now, only 51% ownership in single brand retail was allowed which meant that any foreign company looking to invest would have to form a joint venture with an Indian company. Starbucks’ competitors in the broader market for coffee include McDonald’s (NYSE:MCD), Caribou Coffee (NASDAQ:CBOU) and Dunkin’ Brands (NASDAQ:DNKN).

Uncertainty Looms Over Starbucks’ Expansion and Diversification Plans

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Monday, December 26th, 2011 by Trefis Team

Starbucks (NASDAQ:SBUX) has diversified to more than just coffee with the recent acquisition of Evolution Fresh Juice and the introduction of wine and beer in various outlets. In fact, Starbucks even changed the logo to drop the words ‘Starbucks Coffee’ to highlight that diversification. At the same time the company is expanding rapidly, especially in emerging markets like China, and recently revealed its plan to open up 300 outlets in the U.K. over the next 5 years. However, all of these opportunities also present a fair amount of challenges and could potentially cause hiccups in the growth trajectory of the company. Starbucks’ competitors in the broader market for coffee include McDonald’s (NYSE:MCD), Caribou Coffee (NASDAQ:CBOU) and Dunkin’ Brands (NASDAQ:DNKN).