“Our more than 19,000 store global footprint, our fast-growing CPG presence and our best-in-class digital, card, loyalty and mobile capabilities are creating a ‘flywheel’ effect elevating the relevancy of all things Starbucks, and driving profitability,” said Schultz in the third quarter earnings release.
Starbucks’ massive store presence, its fast-growing consumer packaged goods business, and its successful loyalty card (dollars loaded on Starbucks Cards globally grew 30%, year over year) already makes for an impressive list, but there’s more to Starbuck’s flywheel effect: expansion to daypart business, revamped in-store food offerings, store redesigns, and expansion of drive-thru formats.
The flywheel effect, an idea popularized by business author Jim Collins, suggests that once companies build positive momentum, it is hard to slow them down. Starbucks’ CFO, Troy Alstead, did an excellent job (intentionally or not) making a case for Starbucks’ flywheel effect in the company’s third-quarter earnings release:
Our ability to grow income at a pace that exceeds revenue growth clearly demonstrates the strategic synergies we generate across our global footprint, which combined with the diversity of our portfolio, enables consistent delivery of excellent results. Looking forward to FY14 and beyond, I am as confident as ever in our ability to continue to deliver strong revenue and earnings growth.
Don’t run from Starbucks’ valuation
Consistency. Starbucks’ ability to consistently deliver excellent results thanks to its economic moat and diversified momentum make the company worthy of its premium valuation.
In the short term, Starbucks Corporation (NASDAQ:SBUX)’ lofty valuation could make for a bumpy ride. But for Foolishly long-term-minded investors, Starbucks seems like a low-risk bet for a sweet gain.
The article Starbucks Still Looks Like a Buy originally appeared on Fool.com and is written by Daniel Sparks.
Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola and Starbucks. The Motley Fool owns shares of Starbucks.
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