Much to the delight of investors, Starbucks (SBUX, Financial) posted record income and revenue for the quarter. Starbuck continues to influence its investors with another quarter of terrific operating performance in which all the segments contributed to record results. Starbucks adopted various growth initiated strategies with strong management team that resulted in such an outperforming quarterly results. This happens to avow that Starbucks has been developing on a worldwide scale. Furthermore, it continues to broaden its horizon with a stronger foothold in the developing nations and the raw Asian market.Â
Overview of the quarter
Starbucks recently released its third quarter results for fiscal 2014 which demonstrated growth. Revenue was up by 11% to $4.2 billion as compared to the same quarter last year. Growth was primarily driven by 6% rise in global comparable store sales and incremental revenues from 1,654 net new store openings over the past 12 months. Operating income was up 25% to $768.5 million, compared to $615.2 million for the same period a year ago. Operating margin expanded 200 basis points to 18.5%, primarily driven by sales leverage and lower commodity costs.
Geographical Performance ($ In millions)
| Â | America | EMEA | ASIA |
| Revenue(Q3-2014) | $323.5 | $323.5 | $287.6 |
| Revenue (Q3-2013) | $287.2 | $287.2 | $233.7 |
| Revenue (Change) | 10% Growth | 15% Growth | 23% |
| Operating Income(Q3-2014) | $728.5 | $29.2 | $100.8 |
| Operating Income(Q3-2013) | %619.3 | $9.3 | $84.7 |
| Operating Income(Change) | 18% Growth | 214% Growth | 19% |
| Operating Margin(Q3-2014) | $28.3 | $9.0 | 35% |
| Operating Margin (Q3-2013) | $22.3 | $3.2 | 36.2% |
| Operating Margin (Change) | Up 150 bps | Up 580 bps | Down 120 bps |
| New Stores (Q3-2014) | 149 | 37 | 160 |
| New Stores (Q3-2013) | 158 | 43 | 119 |
| New Stores (change) | 9 Decline | 6 decline | 41 Growth |
In the Asian region, operating margins now seems to be low as compared to year-ago quarter. But if we analyze it closely, we can see that number of new stores has grown by 41 as compared to same quarter last year. The setup and the branding cost associated with the new stores do offset the margin, since its generally high if we compare it to the established stores. The brighter side is that it can be like an steroid for future revenue growth.
The global expansion plans and online ordering system has helped Starbucks to boost its performance. The marketing policy of providing coupons helped Starbucks with repeat ordering.
Teavana acquisition leveraging growth
Starbucks’ universal expansion strategy to build the footprint of its business is exemplary. A mix of acquisitions and the push into developing markets has helped it to pull in clients. Starbucks is looking to expand its deals by offering more than simply espresso. Starbucks acquired Teavana as a strategic move to establish its authority position in the $90 billion worldwide tea market. With Starbucks serving handmade Teavana tea, it's fueling growth by providing more choices to its customers.Â
China Market
Starbucks still plans on proceeding with its development in China and the rest of the Asia-Pacific district. The espresso chain is anticipating opening the 1000th store in China before the year's end. Starbucks is pushing to infiltrate the businesses of second- and third-level urban communities. Looking further later on, Starbucks says China will surpass Canada as the organization's second-biggest market, after the United States, in 2014.
Conclusion
It appears that Starbucks is looking to enhance the normal ticket size, and activities like these ought to help it enhance deals when clients purchase more than simply espresso. Likewise, what inspires me the most is its operations in China. Despite the fact that the stock may be exchanging near 52-week highs, I feel that it can possibly go higher from here.
