Momentum just getting started in Asia
By the end of 2013, the company expects to surpass 4,000 stores in Asia, including 1,000 stores in China, which will make the country the largest market outside of the U.S by 2014. During the most recent quarter (July), the company announced an increase of 29% in revenue, driven by 523 net new stores, and 9% growth in comparable store sales due to an increased traffic count.
During the company’s most recent conference call, John Culver, President, China and Asia Pacific, offered some commentary on the company’s global ambition. Mr. Culver noted that the company has been active over the last several quarters and is laying groundwork for sustainable growth moving forward. The company is still investing into the infrastructure, supply chain, and new advertising methods. Mr. Culver is confident that the Asian markets will deliver aggressive revenue growth in 2014 and beyond.
Even though the company is already experiencing tremendous growth in the region, investors are just seeing a small glimpse of the growth story that is to come. Bloomberg reported that the company is expecting to more than double its Chinese staff to 30,000 by 2015, which indicates the company is still in its infancy stages in terms of development.
Other international markets are performing positively as well with Canada and Latin America delivering significant top-line growth and margin expansion. Management is heavily focused on expanding Asia as evidenced by the company’s conference call transcript which revealed the following word counts:
China: 29 matches
Asia: 17 matches
Latin America: 5 matches
Canada: 3 matches
Europe: 3 matches
India: 1 match
Domestic operations are also great
Investors need to be reminded that despite the company’s aggressive international expansion, the U.S market is still its largest market. Looking at the company’s recent quarterly results shows that U.S operations are positive all across the board.
Same store sales growth of 9% included a 4% contribution from premium beverages and 2% from greater food sales. What is most interesting about the food sales is the fact that this is occurring before the rollout of the premium La Boulange line of food items, which were only available in west coast locations. La Boulange food items should be in 2,500 Starbucks Corporation (NASDAQ:SBUX) locations including key markets such as New York City, Boston, and Chicago by the end of this fiscal year.
First mover advantage: Mobile payments
Starbucks Corporation (NASDAQ:SBUX) is the leader and the first restaurant to introduce mobile-based transactions. Through the use of apps on handheld devices, customers are able to load money on a “virtual gift card” and present their phone at any location. A simple barcode is scanned from the handheld device and payment is automatically deducted from the virtual card to complete a transaction quickly and efficiently. Dollars can be loaded onto the virtual card though any major credit card or PayPal.
In terms of specifics, in the recent quarter, dollars loaded onto the virtual card were up 30% year over year. More than 10% of all transactions in the U.S are done via the virtual card. The company is putting a lot of weight behind this initiative, which is becoming more popular as customers enjoy the convenience of a cash-less transaction. Meanwhile, none of the company’s competitors offer such a convenient alternative.
In 2012, CEO Howard Schultz went on to say that Starbucks is “the number one company not in the U.S. but in the world in terms of mobile payment, transactions and dollars.”