Starbucks Perks Up in Down Economy
This article is part of ourRising Star Portfolio series.
Judging by its quarterly results, Starbucks (NAS: SBUX) is navigating the troubled economic climate just fine. These are promising tidings from a company that follows the laudable path of doing well by doing good.
Fourth-quarter net income soared 28.5% to $358.5 million, or $0.47 per share. Total revenue jumped 6.8% to $2.47 billion, and same-store sales jumped a healthy 9%, driven by a 6% increase in customer traffic and a 3% increase in average ticket.
Starbucks also sweetened the deal for shareholders by hiking its quarterly dividend by 31% to $0.17 per share.
The coffee giant's competing quite well in today's economic climate, which is marked by high levels of unemployment, pinched consumer spending, and commodity inflation.
The fact that Starbucks turned in such heartening U.S. sales data (clocking a 10% gain in U.S. comps, compared to a 6% international increase) is also a great sign; the U.S. market has been a sticking point for consumer-facing stocks like Wal-Mart (NYS: WMT) , which has been struggling to boost American sales.
Folks who ditched Starbucks on Dunkin' Brands' (NAS: DNKN) tidings earlier this week hopefully learned a lesson about keeping knee-jerk reactions in check. Although other caffeinated stocks like Peet's Coffee & Tea (NAS: PEET) , Caribou (NAS: CBOU) , and Green Mountain Coffee Roasters (NAS: GMCR) also received a scalding cup of bearishness, as it turns out, Starbucks was a keeper.
In September, I purchased shares of Starbucks for the real-money Rising Star portfolio I'm running for Fool.com, which is focused on purchasing stocks of companies that seek to do good in the world and do well financially. Today's tidings make me feel more confident than ever about Starbucks' presence in the portfolio. Times may be tough, but founder and CEO Howard Schultz has done a great job navigating the rough seas, and clearly has learned a few lessons from the company's difficulties several years ago, too.
Traditional Wall Street types have probably missed some of Starbucks' significantly positive initiatives, such as the fact that it recently teamed up with some nonprofit, community-based financial institutions on the Create Jobs for USA Fund, which helps companies hire or at least avoid laying off American workers. (Starbucks donated $5 million; you can donate to the fund at Starbucks locations, too.)
Investors who fear Starbucks' current price should note that it's still reasonably priced compared to its peers. Starbucks trades at a forward price-to-earnings ratio of 23, comparing quite favorably to Peet's, which trades at 35 times forward earnings, or Caribou, which sports a forward P/E of 28.
Starbucks is shining bright in the currently dismal economic climate. Investors should consider helping themselves -- or topping off their portfolios with an additional serving of the coffee giant's shares.
- Add Starbucks to My Watchlist.
- Add Peet's Coffee & Tea to My Watchlist.
- Add Green Mountain Coffee Roasters to My Watchlist.
- Add Dunkin' Brands Group to My Watchlist.
- Add Caribou Coffee to My Watchlist.
At the time this article was published Alyce Lomax owns shares of Starbucks in her personal portfolio. The Motley Fool owns shares of Wal-Mart Stores and Starbucks. Motley Fool newsletter services have recommended buying shares of Starbucks, Green Mountain Coffee Roasters, and Wal-Mart Stores. Motley Fool newsletter services have recommended creating a diagonal call position in Wal-Mart Stores as well as creating a lurking gator position in Green Mountain Coffee Roasters. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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