Starbucks (SBUX) is one of those household names that everyone knows. It has of lately been on a bullish run like few other stocks. We believe Starbucks will continue to grow at least another 20%. If you have yet to read on Starbucks, Takeover Analyst has a great article I would recommend reading. In this article, Starbucks has two growth factors going for it we will mention and then explore when to get into the stock.
Starbucks Corporation purchases and roasts whole bean coffees. It operates 6,705 stores and has 4,082 licensed stores in the United States; and 2,326 company-operated stores and 3,890 licensed stores in Canada, the U.K., China, Germany, Thailand, and internationally. The company provides regular and decaffeinated coffee beverages, Italian-style espresso beverages, cold blended beverages, iced shaken refreshment beverages, premium teas, packaged roasted whole bean coffees, and soluble coffees. Starbucks stores also offer various fresh food items, including pastries, prepared breakfast and lunch sandwiches, oatmeal, and salads, as well as juices and bottled water.
Growth Factors for Starbucks
I mentioned in my opening paragraph, "Take-Over Analyst" has a nice article on Starbucks where he states; "The rise of Starbucks, domestically, has largely been about market saturation. As that strategy takes foot in international markets, the potential is extraordinary." And Starbucks has a well defined plan on how to develop the international market. Herman Uscategui is the man in charge of International expansion. Any would-be international partner will be required to spend 13 weeks in Seattle, with the sole purpose in mind to understand what he calls the "culture and values" of the company. 20% of its stores are outside the United States with the four largest markets being Japan, England, China, and Taiwan. We will see that grow.
Secondly, Starbuck's expansion into the wine and beer markets is designed to increase business by more than 10% at U.S. outlets. Realizing that 70% of its daily revenue comes in by 2 p.m. (which is understandable because most people drink coffee early), the strategy is to increase business after 2 p.m. We're really trying to expand the evening daypart," said Starbucks spokesman Alan Hilowitz. "Customers have told us they want to be able to come in and have coffee, or a glass of wine." In the six stores in the Portland/Seattle area that were used as a test market, sales increase more than 10% after 4 p.m. Mr. Hilowitz goes on to say.
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Investing in Starbucks
Between growth from the International Markets and the exploration of adding wine & beer along with foods to increase evening business, Starbucks looks like it is set to continue to grow for years to come. We believe it is a great long-term investment. It has steadily grown since September of 2010. From March to September of 2011 it moved sideways and since that time has continued to move up again. We believe it is in a long-term growth pattern and may spend a few months this year consolidating but we see the company moving up again.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
