On April 24, Starbucks (SBUX, Financial), the Seattle-based coffee giant, posted an impressive double-digit revenue growth in its fiscal second quarter with a total rise of 18% to $4.56 billion, way more than the analyst estimates of $4.53 billion. The declaration of this stunning performance in the company's strong quarter by Howard Schultz, Starbucks CEO put to rest all worries about stagnation of its growth and boosted the share value up by 5.4% to $52.12 in after-hours trading on Thursday.
Starbucks Corp declared that the success of newly launched breakfast sandwiches, lunch and new drinks propelled the higher-than-expected sales at its coffee shops in the Americas.
Stunning performance
In the fiscal second quarter that ended on March 29, the Americas region which encompasses all stores in the United States, Canada and Latin America, emerged as the major contributor in the company’s revenue. The sales at stores in this region, which were operational for at least 13 months, was up by 7% overtaking the expected rise of 5.1% by Consensus Matrix polled by analysts by a handsome margin. In the last three months, Starbucks has opened 210 new stores making a grand total of 22,088 worldwide and successful acquiring Starbucks Japan. Augmenting the impressive sales report in the Americas region, sales in China/Asia Pacific region also jumped by 12% with EMEA sales rising by 2%.
In the last one and a half years, customer visits to Starbucks' Americas-region cafes were noted as decelerating fueling apprehensions of stagnation and slow demand among the investors and analysts. The coffee chain's quarterly net earnings growth of 16% to $494.9 million,, giving 33 cents per share, has come as a welcome surprise to all.
Barclays’ (BCS, Financial) analyst Jeffrey Bernstein remarked that Starbucks Corporation stunning second quarter growth with increased traffic of 3%, was distributed across all day parts, geographies and platforms (food and beverage) with elevated sales at peak times speaking volumes about capacity for more growth.
Non-coffee ventures like the pledging of $250 million on employee tuition reimbursement, trendy rewards programmes and the somewhat controversial "race together" initiative also kept the coffee stalwart in the news.
Coming up
Starbucks is busy expanding its much-in-demand menus with food, beer and wine, tea drinks and fruit-vegetable smoothies with extensive plans to offer a delivery service with a mobile order and pay convenience in New York City and Seattle after the successful trial run. These initiatives are in line with the technology upgradations seen in rival chains like McDonald's Corp (MCD, Financial) and Panera Bread Co. (PNRA, Financial), to woo the young and super busy, tech-savvy crowd with convenient, quick and efficient ordering services.
Starbucks expects the strong dollar to cut into the earnings and revenue but still projects its fiscal 2015 revenue growth around 16% to 18% with $1.55 to $1.57 per share on a split-adjusted basis.
According to Starbucks CEO Howard Schultz, “Innovation is the force that will continue to drive our business and enable us to expand and increase revenues and profits – always through the lens of humanity – long into the future”.
In fiscal 2016, the world’s largest coffee chain will continue its innovative efforts for international growth and drawing incremental traffic through digital technology, loyalty programs, gift cards, and novel food and beverage offering with mobile order and pay being key to accelerate growth.
