these forecasts Starbucks is expanding
towards more premium stores with the
announcement of 25 to 30 new
“Roastery” and “Reserve” stores
including the highly-publicized Milan
store that is planned to open in 2018.
Also, the company plans to expand
their “Channel Development” portfolio
(all those Starbucks products you can
buy at the supermarket), as this sector
is expected to enjoy larger growth rates
and Starbucks has the most powerful
brand in world of coffee. In addition,
Starbucks is looking to diversify its
business to related products like high
end experience store chain Teavana,
Princi and juice brand Evolution
Fresh.
the company to go down 2% so far, this
year. So, the question remains, does
Starbucks still have the legs to grow
and beat the market?
To answer this question, we have to
first read the income statement to see
how much Starbucks’ sales have grown
in recent years, how much of those
sales have translated into earnings, and
see how much of those earnings have
translated into operating cash flows
(earnings after adding non-cash
expenses like depreciation back and
subtracting all those cash expenses that
don’t show in the income statement),
and see how this will change in the
future.
Starbucks’ sales have grown at an
average rate of 13% in the last three
years (10.6% in 2014, 16.5% in 2015
and 11.2% in 2016) and an increase of
6.7% in year-to-year sales last quarter.
Analysts are concerned with the growth
of sales of retail coffee in the future as
market experts forecast growth rates to
slow down. To counter
Another way Starbucks is trying to keep
sales growing is by expanding their
mobile
app
purchases,
which
represented 7% of all transactions last
year.
A
significant
proportion
considering that it represented only 3%
of all transactions just a year before.
The volume of mobile transactions has
increased so much, that in 1,200 stores
they account for 20% of all transactions
at peak time which puts a lot of
pressure on baristas that see how
demand exceeds capacity, which if
we're being honest is a good problem
to have. This modality of selling is
important to consider as it also gives
the company the option to open
express stores in places with high
traffic. All these considered, we are
confident that Starbucks can maintain
sales growth rates of at least 10% in the
next five years.
The second important set of metrics we
are going to use to find the value of
the company, are the operating income
earnings. Earnings or net income refers
to all the accounting profits generated
by the company in a
Starbucks: A Growth Story