The retail coffee sector continues to percolate, led by the great second quarter results of Starbucks Corporation (NASDAQ:SBUX).
Starbucks Corporation (NASDAQ:SBUX)’s second quarter saw solid growth in sales and profits. The stock is trading close to all-time highs. And some analysts contend the share price will continue to climb. Their argument is based on the successful introduction of a new menu that features more options. This includes salads and the recently acquired La Boulange baked goods. Starbucks Corporation (NASDAQ:SBUX) has also begun an initial push into China with the coffee king’s ready-to-drink line of beverages.
Starbucks on a Bullish Run
Starbucks Corporation (NASDAQ:SBUX) stock has been running with the bulls for several years, and 2013 continues a significant upward trend over the last four quarters. For Q2, earnings per share grew by a whopping 28% year over year. The retailer reported this was due to an increase in revenue and improved operating margins – 16.4%. The margin figure, in turn, stems from lower bean costs, which are expected to last.
Further, Starbucks Corporation (NASDAQ:SBUX) raised its full-year earnings forecast to about $2.23 per share and expects earnings per share growth in 2014 of 18% to 22%. Moreover, Starbucks Corporation (NASDAQ:SBUX) recently increased prices on some items which should support solid margin figures going forward. Some observers contend the improved margins will eventually spill over into the company’s dividend payouts – currently a bit light at 1.2%.
In sum, the coffee house continues to focus on food and healthy snacks. The baked La Boulange line has been particularly successful with breakfast shoppers looking for a better bite than bagels and donuts.
Starbucks Has Allies
In addition to focusing on food, the company is looking to grow by way of strategic alliances. The company is said to be negotiating a deal with Dannon to come up with an original line of yogurt even if coffee flavored yogurt cultures may not be everyone’s cup of tea.
A proven successful strategic play for Starbucks Corporation (NASDAQ:SBUX) has been with Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR). Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) is the maker of Keurig K-Cup coffee machines. These little brewsters have turned up in offices across the US – possibly leading to less fighting among co-workers as to who’s been leaving the coffee room such a mess.
But the K-Cup brewers offer an array of flavors, and this has been the cornerstone of Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR)’s success. Further, the coffee roaster has an agreement with Starbucks to package and distribute the coffee chain’s hot beverages in a K-Cup format. And Starbucks is selling the brewing machines in their stores. This has been a win-win venture.