Is Starbucks Setting the Stage for 2013 Growth?

  on January 25 2013 10:16 AM

Starbucks (NASDAQ:SBUX) reported record fiscal first-quarter results after the bell on Thursday. Revenues climbed 11 percent on the back of holiday spending (Starbucks gift cards were incredibly popular this season) to $3.8 billion. Earnings grew 14 percent to $0.57 per share, sharpened by a 40 basis-point increase in operating margins to 16.6 percent.

“Starbucks’ strong performance in Q1 demonstrates the strength, and unique resilience, of our increasingly global business, and the power and growing relevance of the Starbucks brand to consumers and communities all around the world,” chief executive Howard Schultz said in the earnings release.

Schultz could be emphasizing resilience given the uncertain nature of the markets right now. Economic headwinds appear to finally be turning around, but it’s still stormy. Growth is never guaranteed, but Starbucks has logged three consecutive years of top- and bottom-line growth after weathering the crisis with no losses.

The stock powered to a high of around $61 in April 2012 before the market began to think the company was overpriced. After a forecast that was revised downward, shares tumbled below $45 before eventually recovering to about $55. In general, though, analysts remain very bullish on the stock partly because of the company’s ability to grow quickly and effectively.

Same-store sales grew 7 percent in the United States and 6 percent globally. This included 11 percent comparable growth in China/Asia Pacific, which are arguably regions with the greatest growth opportunities. Starbucks opened 125 stores in China/Asia Pacific in the quarter, four more than last year.

Same-region revenues grew 28 percent, while earnings were close behind at a 26 percent growth. Margins moved up 60 basis points to 33.7 percent, by far the highest in any of its segments.

Starbucks is also advancing its K-Cup business. Revenues were up 13 percent for the segment, while operating income climbed 24 percent on the back of a 230 basis-point increase in margins. This is sure to present a challenge for Green Mountain Coffee Roasters (NASDAQ:GMCR), which closed the day up 6.5 percent as David Einhorn acknowledged that his short position had backfired.

Dunkin’ Brands (NASDAQ:DNKN) will report its earnings before the markets open next Thursday. The stock has been on a tear recently, and analysts are looking for $0.33 per share from the company. Dunkin has historically come in ahead of expectations.

Starbucks Corporation Stock Chart - SBUX Interactive Chart - Yahoo! Finance

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