Starbucks Corporation (NASDAQ:SBUX) has been an inspiring story, to say the least. From a small store in Seattle in 1971, Starbucks can now be found on virtually every corner in the U.S. Before Starbucks, coffee used to be just another drink, but the company has successfully made people want to have coffee over and over again, and only at Starbucks.
Today Starbucks Corporation (NASDAQ:SBUX) is operating everywhere in America, trading near an all time high and boasting a P/E of 33, which has led many investors think that maybe Starbucks has run its course. Does this argument hold weight, or is Starbucks ready to come back for round two?
Starbucks shows no signs of fatigue
After so many years of dominance in the coffee space, Starbucks Corporation (NASDAQ:SBUX) shows no signs of deceleration in growth or in profitability. The company’s revenue has grown by more than 10% for each of the last six quarters, and 11.30% for the last quarter, while net income has increased a whopping 287.21% to $1.514 billion in 2012 from $391 million in 2009. The operating margin has more than doubled to 14.01% in 2012 from 4.5% in 2009. These are signs of a strong company whose growth is far from over, implying that investment in the company might still generate healthy returns.
Historically low coffee price provide a medium term tailwind
With the Arabica coffee prices near a 3-year low, management believes its operating profit will at least get a $100 million boost this year and a similar amount next fiscal year. Investors surely won’t mind the extra profits, would you?
Starbucks is on its way to become an international powerhouse!
U.S. undoubtedly is Starbucks Corporation (NASDAQ:SBUX)’ leading market, generating 75% of the company’s revenue, which is why the company is planning to open more than 1500 new stores in the U.S. by 2015. So with just 25% of its revenue coming from international markets, there is a huge opportunity for Starbucks to achieve record levels of revenue if it could entice customers outside of the U.S.
The giant’s first target is China
With over 830 stores in China today and plans to cross the 1500 figure by 2015, Starbucks has answered all the critics who bluntly stated that coffee will never become a trend in China. Through intelligent mixing of tea flavors into coffee and providing a modern and comfortable environment (which Chinese restaurants lacked) for friends and colleagues to meet up, Starbucks Corporation (NASDAQ:SBUX) has become so successful in China that management now believes it will be the company’s largest market after the U.S. by 2014.
One of Starbucks’ closest peers, McDonald’s Corporation (NYSE:MCD) , was the first to target the Chinese market. McDonald’s competes with Starbucks through its McCafe stores, which offer coffee at a cheaper price than Starbucks and have thus posed a threat to the company. McDonald’s Corporation (NYSE:MCD) plans to increase the number of McCafe stores in China by 45% to 750 stores by the end of this year. Apart from that, the company has plans to hire over 75,000 new employees and open 300 new stores this year to accelerate its expansion plans in the one of the world’s fastest growing economies.
Don’t worry India, there’s a plan for you too
India’s middle class is expanding very rapidly, and so is their love for coffee. With more discretionary income in their hands and their growing love for a modern lifestyle, the coffee shop industry might be a multi-billion dollar industry in India over the coming 10 years. With just 11 stores in the country so far, Starbucks Corporation (NASDAQ:SBUX) plans to open around 50 more by the end of this year to participate in India’s growing love for coffee.
Starbucks’ flagship store in Vietnam exceeds expectations
Starbucks Corporation (NASDAQ:SBUX) launched its first store in Vietnam earlier this year, and according to Mr. Schultz sales are exceeding expectations. Vietnam is one of south-east Asia’s fastest growing economies, and if Mr. Schultz is right then Starbucks might have another winner in Vietnam.
Apart from the above-mentioned countries, Starbucks plans to open 100 more stores in Indonesia and the Philippines in the next 3 to 4 years.