Starbucks' Growth Strategy

Topics: Revenue, Coffee, Coffeehouse Pages: 2 (440 words) Published: September 6, 2008
Starbucks (Nasdaq: SBUX) reported strong fourth-quarter and fiscal 2003 results yesterday after the bell, with annual revenues jumping 24% to $4.1 billion and earnings growing 26% to $268.3 million. Shares are dipping about 2% so far today, presumably because the company's $0.17 in Q4 EPS met, rather than beat, expectations.

Despite the market's lukewarm response, there's much to praise here, and opportunities for more growth abound. The company's comparable-store sales results were again impressive, and the future of its international expansion looks promising. Further, Starbucks' plans for domestic growth are encouraging, thanks to the rollout of more drive-through stores.

Starbucks (which I happily own shares of) posted an 8% comparable-store sales gain for the year, marking the 12th year in a row the company's comps have been 5% or better. It's projecting 3%-7% comps growth for fiscal 2004 -- the same guidance it gave for the just-completed year. Starbucks' same-store sales success is primarily transaction-driven, meaning that it's not relying only on higher prices to drive growth. That's an important factor in the quality of its comps gains.

We already know it entered its first quarter upbeat, with same-store sales growth of 9% for the month of October. With the rollout of its famed holiday drinks (don't come between me and a Gingerbread Latte), and the continued success of the Starbucks card, Q1's likely to be another winner.

Starbucks' international operations will turn profitable this year, a significant milestone for the company. It will add 350 international locations to its lineup, with 300 of them being licensed stores. Troubles in Japan haven't squashed Starbucks' belief that it can be a welcome part of diverse cultures the world over. The company will continue to partner locally in order to achieve this balance between a consistent Starbucks experience and a locally tailored one.

In the U.S. and Canada, Starbucks will add 950...
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