Starbucks Corp (SBUX): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


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Starbucks' adjusted earnings of $0.80 per share in the first quarter were in line with the Zacks Consensus Estimate. However, earnings grew 23% year over year driven by solid top line growth and margin expansion. Strong traffic trends in the American stores and improved comps in the China Asia-Pacific segment drove a 13% increase in sales in the quarter. A strong holiday performance led to improved traffic trends in American stores. We believe Starbucks enjoys healthy fundamentals strong global retail footprint, successful food/beverage innovations, best-in-class loyalty program and digital offerings, rapid growth in international markets and ongoing impressive CPG growth. Moreover, La Boulange bakery platform, the new handcrafted beverages, lunch/evening program, Teavana tea and K-Cups innovations and digital efforts can fuel stronger traffic as fiscal 2015 unfolds. However a challenging retail environment keeps us on the sidelines


Founded in 1985 and based in Seattle, WA, Starbucks Corporation (SBUX) is the leading roaster and retailer of specialty coffee in the world. In addition to fresh, rich-brewed coffees, Starbucks' offerings include many complementary food items and a selection of premium teas and other beverages, sold mainly through the company s retail stores. Starbucks has more than 21,000 stores across 66 countries. The company s popular brands include Starbucks coffee, Teavana tea, Tazo Tea, Seattle's Best Coffee, La Boulange bakery products and Evolution Fresh juices.

Other than the company's own retail stores (accounting for 79% of fiscal 2014 revenues), it generates revenues through licensed stores (10%), consumer packaged goods (8%) and foodservice operations (3%). The company receives royalties and license fees from the U.S. and international licensed stores. Under its consumer packaged goods operations, Starbucks sells packed coffee and tea products as well as a variety of ready-to-drink beverages and single-serve coffee and tea products to grocery, warehouse clubs and specialty retail stores. It also includes revenues from licensing deals with many partners to produce and sell its Starbucks and Seattle's Best Coffee branded products. Under its foodservice operations, Starbucks supplies some of its products to restaurants, office coffee distributors, hotels, airlines and other retailers.

Starbucks operates through the following segments: Americas (inclusive of the U.S., Canada and Latin America) Europe, Middle East and Africa (EMEA) China-Asia-Pacific (CAP) and Channel Development (CD) and All-Other. The CD segment is not a geographic region but an entirely different channel (referred to as CPG channel henceforth). It includes roasted whole bean and ground coffees, premium Tazo teas, a variety of ready-to-drink beverages (like Frappuccino and Strabucks Refreshers) and Starbucks and Tazo branded K-Cup packs sold through channels such as grocery, specialty retailers, and foodservice to name a few. The All-Other segment comprises emerging brands including Teavana (acquired in Dec 2012), Seattle's Best Coffee, Evolution Fresh and Digital Ventures.

The company's long-term targets include revenue growth of 10% or greater, global comparable store sales in the mid single-digits, earnings per share growth of 15% to 20% and 25% or higher return on invested capital.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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