Starbucks Delivery to Debut in Seattle & New York in 2H15 - Analyst Blog

Starbucks CorporationSBUX is on a roll and probably enjoying the golden period in its business.

After launching innovative services like mobile ordering and premium coffee subscription in less than a year, Starbucks, at it annual shareholders meeting in Seattle, declared that its previously announced plans to deliver food and beverages will start in certain parts of Seattle and New York City later this year.

How Will the Delivery Service Work?

Under the twin delivery service models, Starbucks will deliver food and drinks to customers in a few selected areas of Seattle and New York City either through a third party or its own employees.

Under the first delivery option, Starbucks has teamed up with on-demand delivery service, Postmates, to deliver the items in select areas of Seattle, its home turf.

For the second model, Starbucks employees, fondly named "baristas", will deliver food and beverages in specified office-buildings in New York City, reportedly starting with the Empire State Building.

Customers in Seattle can place orders through the Starbucks mobile app while those in New York can order online. Both the services will be launched in the second half of this year

Earlier this week, Starbucks expanded Mobile Order & Pay service - debuted last year - to approximately 650 stores across Washington, Idaho, Oregon and Alaska. The mobile ordering initiative allows customers to order before arriving at a Starbucks café and pick up their order at their selected Starbucks store. The company launched the service in 150 stores in Portland, OR in December last year and plans to expand it nationwide by the end of this year.

In February, Starbucks launched a subscription service under which freshly roasted premium coffees will be delivered to customer's home straight from the newly opened Seattle roastery.

We believe that digital efforts like mobile order/pay and delivery services, new handcrafted beverages, lunch/evening program, strong food sales, Teavana tea and K-Cup innovations can fuel stronger traffic trends at Starbucks stores in fiscal 2015.

Other Updates from the Meeting

In a separate press release, Starbucks announced its sixth 2-for-1 stock split plan. Under the plan, shareholders of record as on Mar 30 will receive one additional share for each share they own. The new shares will be payable on Apr 8. Starbucks will begin trading on a split-adjusted basis the following day.

Starbucks also announced a partnership agreement with Chinese food/beverage company, Tingyi Holding Corp., to manufacture and distribute its ready-to-drink products throughout China.

At the meeting, Starbucks also said it plans to open its second roastery in Asia in 2016 and is looking for real estate for its second U.S. roastery.

Starbucks opened its first ever Reserve Roastery and Tasting Room in Pike Street, Seattle in Dec 2014. With this, Starbucks expects to double its small-batch roasting capacity of unique super-premium arabica Reserve brand coffees and expand their availability to 1,500 stores globally. Moreover, the company plans to open 100 upscale Reserve Roastery stores over the next five years.

Stocks to Consider

Starbucks carries a Zacks Rank #3 (Hold). Some restaurateurs worth considering include Dave & Buster's Entertainment, Inc. PLAY , Cracker Barrel Old Country Store, Inc. CBRL and BJ's Restaurants, Inc. BJRI . All these stocks sport a Zacks Rank #1 (Strong Buy).

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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.

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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