Starbucks (SBUX) reported earnings of $0.71 per share on 1/23/2014 ending the company’s best year in history. These earnings were higher than the $0.69 majority estimate. Performance was undoubtedly outstanding. The coffee chain posted a record of $4.2 billion in sales for its first fiscal quarter of 2014. There are several important factors that draw attention when considering Starbucks as an investment over the course of the next year.
First off, the importance of same-store growth for Starbucks cannot go unnoticed. This growth creates continuing value, especially in the unsurmounted U.S. market. Various experts believe that over 80% of Americans live within 20 miles of a Starbucks location.
The company’s plans to expand itself are on track as expected. Not only did they open 417 new stores in the first quarter, but they also grew revenue by 12% to the record of $4.2 billion. Management has stated that they plan to open an additional 1,500 stores in the 2014 fiscal year. In fact, the company is beating their expected pace for new store growth.
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Sales growth within these stores is also important. With so many locations, there becomes a point that the major way to increase revenue is by simply increasing sales per store. The company is attempting to tackle this by offering various food and treat items to their lineup.
In the fourth quarter of 2013, same store sales growth grew 8%, as opposed to 5% in the first quarter of 2014. This was a major disappointment, and completely unexpected. This setback proves that the new food lineup is not being as effective as they would have hoped just yet. However, this is no reason to lose hope. By the end of 2014 all company-owned U.S. locations will have maintained their newest food line, La Boulange, for a minimum of six months.
One metric that was as expected was the company’s operating margin. Starbucks announced a 2.6% improvement as opposed to the prior-year, totalling 19.2%. The company’s operating margin has been significantly lower in the past, and it will likely increase over the next year.
Granted, this is only one quarter that we are excited about. What is one measly quarter? This quarter can give crucial insight as to the future of the company. It allows us to see the future of the company’s potential. This quarter shows is that the expansion of stores and profit margin are right where they should be. Keep an eye on same store growth, and this may be a great long term investment.
Disclosure: No current position held at the time of writing.
Disclaimer: The opinions and ideas in this article are for informational and educational purposes only. They are not a recommendation to buy or sell any stock at any given time. As always, it is imperative for each individual investor to do their own due diligence and perform their own research on any and all stocks before making an investment decision.