30,000 Stores For Starbucks? (SBUX)

| About: Starbucks Corporation (SBUX)
This article is now exclusive for PRO subscribers.

Buried in the Starbucks (NASD:SBUX) 10-K is a reference to the company's long-term goal of having 15,000 stores in the U.S. and 15,000 stores overseas. The company also expects 20% per year net revenue growth for the next three to five years. On October 2, 2005, when the company's fiscal year ended, it had 6,000 stores owned by the company and 4,241 operating under license.

When the company announced its Q2 earnings (fiscal Q2 ending April 2, 2006; see conference call transcript), it stated that its goal was to open another 1,800 new stores globally by the end of the year. That would get them over 12,000.

There is no doubt that Starbucks is a growth engine. The company's revenues for fiscal Q2 were $1.88 billion up from $1.519 billion in the year ago period. Operating income rose from $157 million to $202 million. The company reaffirmed that it expects 20% net revenue growth for the upcoming quarter and the full fiscal year.

At the company's current revenue run rate, with 12,000 stores, the revenue yield per store would be $633,000. McDonald's (NYSE:MCD) currently has nearly 32,000 stores, up from 23,000 ten years ago. McDonald's revenue for 2005 was $20.46 billion, or $639,000 per store.

So, it is not unfair to ask if coffee is as popular as hamburgers. The answer may well be yes.

As Starbucks continues to add stores, there will naturally be a great deal of skepticism about whether it can keep up the pace. It would appear for the time being that the three to five year targets for revenue are not overly ambitious.

At $38.79, the stock is just shy of its all-time high. It's market cap is $29.6 billion. Any stumble in growth is likely to cause a pullback. But, today, the market is betting, with some good reason, that there is not a stumble in the foreseeable future.

SBUX 2-yr Chart

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He is also the former president of Switchboard.com, which was the 10th most visited site in the world at the time, according to MediaMetrix. He has been chief executive of FutureSource LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. He can be reached at douglasamcintyre@gmail.com.