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Starbucks Corporation (SBUX): Global Expansion and Product Launches to Drive This Restaurant’s Growth

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Starbucks Corporation (NASDAQ:SBUX)‘s stock has given good returns post its latest quarterly results. The beverage company reported results which were inline with the expectations. With the fall in price of coffee due to the bumper harvest in Brazil, a better gross margin for the company in the coming quarters can be expected.

Starbucks Corporation (NASDAQ:SBUX)

Starbucks Corporation (NASDAQ:SBUX) also acquired Teavana — a tea company, which adds to its portfolio of beverages. It is opening new stores in the developing countries, which have already shown tremendous increase in revenue. With its aggressive expansion plans in Asia, the company has tremendous potential to gain market share. Below, I explore the above mentioned points, which make Starbucks Corporation (NASDAQ:SBUX) a good investment.

Strong same-store sales trend

The same-store sales (SSS) have seen a 6% increase globally in the first quarter of calendar year (CY) 2013. In the US, same-store sales increased 6% over the last financial year, while in the China/Asia Pacific region the growth is about 11%. With the new product offerings and the robust consumer sentiment in the US, same-store sales are expected to remain strong in the US and Asia Pacific. Europe, on the other hand, is not seeing much strength and has been subdued due to prolonged recessionary conditions. Despite weakness in Europe, I believe, the company can still post mid single-digit SSS and 10% to 13% total revenue growth this year thanks to the strong US and Asia Pacific regions.

New stores opening

The company is planning to open 600 new stores in the US region during FY 2013 and this is going to contribute about 2% to the revenue. The company is also planning to open 600 new stores in the China/Asia Pacific region. With increasing purchasing-power parity (PPP), this region will continue to contribute to the company’s revenue. I expect growth of 15% in revenue from this region in the coming years.

Channel development segment

The company’s consumer products, which are sold outside of company stores in the retail channel, have shown impressive growth of about 50% in FY 2012. In the first quarter CY 2013, channel-development revenue has increased by 7% over Q1 CY 2012 primarily driven by Starbucks Corporation (NASDAQ:SBUX) and Tanzo-branded K-Cup packs. I believe this segment will contribute high single digits to the company’s top line and bottom line in the coming years.

Acquisitions and collaboration

The company has been aggressively trying to venture into new avenues which have the potential to increase its traffic. It has acquired Teavana and La Boulange, a bakery that will help it bolster its food sales. This will help the company target the tea-segment customer. This segment will grow in double digits given the company’s brand recognition. The company has also entered into a long-term relationship with Hong Kong-based Maxim’s group to operate its stores in Vietnam. This will get Starbucks Corporation (NASDAQ:SBUX) a foothold in eastern Asia.

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