Starbucks Reveals Long-Term Plans - Analyst Blog
06 Décembre 2012 - 6:50PM
Zacks
World’s biggest coffee company Starbucks
Corporation (SBUX) recently announced its long-term
objectives pertaining to store expansion and growth strategies for
each of its segments; its entry into the tea industry and its
initiatives to boost consumer relations. The company plans to take
the following steps to ensure growth in the upcoming fiscal
years.
Segment Specific Plans
The Americas business has witnessed a substantial
turnaround since the last couple of years. The segment witnessed 9%
growth in net sales to $2.5 billion in the fourth quarter of 2012,
driven by 7% growth in same-store sales and new store openings.
The company intends to open more than 3,000 new stores and remodel
many more in the next five years in order to capitalize on the
strong demand for Starbucks products in America. By the end of
2013, Starbucks customers in the U.S will be able to enjoy La
Boulange products and Evolution Fresh juices in company-operated
stores.
Starbucks has also been witnessing strong performance in the
China-Asia-Pacific (CAP) segment. In fact, net
revenue grew 28% in the fourth quarter of 2012, driven by a 10%
rise in same-store sales and new store openings. China, Thailand,
Singapore and Australia all posted strong performances.
The company believes China will become its second-largest market by
2014, surpassing Canada. The segment will have 4,000 stores by the
end of 2013, of which 1,000 will be in Mainland China, 1,000 in
Japan and 500 in Korea.
China is one of the most important markets for Starbucks and the
company plans to have 1,500 stores in 70 cities in 2015. Starbucks
has opened its first three stores in India and plans to open a
fourth store in early 2013. The company also intends to open its
first store in Vietnam.
Europe, Middle East and Africa segment witnessed a
2% decline in net revenue to $283.7 million in the fourth quarter
of 2012, hurt by flat traffic and currency headwinds. However,
revenue and profit is expected to improve significantly over the
next five years. Also, the company intends to focus on brand
building, generating more revenue from the existing stores and
increasing licensing agreements.
The Consumer Packaged Goods (CPG) (formerly known
as Channel Development (CD)) segment includes the U.S. Foodservice
business and also sells whole bean and ground coffees, premium Tazo
teas, a variety of ready-to-drink beverages, Starbucks VIA Ready
Brew, Starbucks coffee and Tazo tea K-Cup packs, and Starbucks
super-premium ice creams.
This high-margin, high return on capital business reported 32%
revenue growth in the fourth quarter of 2012, fueled mainly by
higher sales of Starbucks branded K-Cup portion packs, which are
fast gaining traction. The international footprint of this segment
is expected to double by 2015. Starbucks plans to build 100,000
distributions centers in 20 countries. A customer loyalty program,
My Starbucks Rewards, will also be introduced in 2013.
Plans Regarding Teavana Acquisition
On November 14, 2012, Starbucks agreed to acquire Atlanta-based tea
store chain Teavana Holdings, Inc. (TEA) for
approximately $620 million in cash. The acquisition will bring
together Starbucks’ expertise in real estate, style and store
management and Teavana’s competencies in global tea industry.
Teavana operates through 300 mall-based stores, which Starbucks
plans to expand as well as establish new standalone Teavana
neighborhood stores domestically as well as internationally.
The acquisition will enable Starbucks to expand in the $40 billion
global tea market and claim a leading position. Starbucks is
constantly on the lookout for new additions to its product
portfolio, other than coffee, like La Boulange products and
Evolution Fresh juices. Teavana is another step in that
direction.
Connecting with Consumers
Starbucks connects with its consumers through its social, Internet,
mobile, loyalty and cards programs. Starbucks cards are now used
for 25% of the transactions in the U.S and the money loaded on the
cards grew over 20%. The company expects 10% of the payments to be
made using the mobile application by the end of fiscal 2013.
We are positive about the company’s long-term plans. We appreciate
Starbucks’ strong market position, new product launches, rapid
growth in China as well as a solid turnaround in its U.S.
business.
Following the solid fourth quarter results, Starbucks upped its
forecast for earnings, operating margins and global net new stores
for fiscal 2013. However, poor sales in Europe due to depressed
macroeconomic conditions keep us on the sidelines.
Starbucks carries a Zacks #2 Rank in the near term (Buy rating).
Currently, we have a Neutral recommendation on Starbucks over the
long term.
STARBUCKS CORP (SBUX): Free Stock Analysis Report
TEAVANA HOLDING (TEA): Free Stock Analysis Report
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