Starbucks Dazzles With More of the Same
It's the same old story at Starbucks . The coffee giant just announced results on a quarter that looked a lot like the results it posted each quarter for the past few years.
Impressive comparable sales growth? Check.
Margin expansion? Check.
Reaffirmed aggressive growth targets? Check.
For investors who followed along as Starbucks has booked 12 consecutive quarters of same-store sales growth north of 5%, consistency isn't a bad thing at all. What's surprising is that, despite the tough retail environment, Starbucks did it again this past holiday season, turning in results that most consumer-facing companies would kill for.
Coffee is king
The key driver was sales growth, particularly in the U.S. Comparable stores clocked in at 6% higher globally, led by a scorching 7% rise in the U.S. region. The increase was mostly due to rising transaction volumes, but a boost in the average check helped too.
That result puts Starbucks near the top of the retail heap this past holiday. Consumers cut back on purchases from luxury brands like Tiffany and Coach, and even dialed down the spending at ultra-affordable McDonald's. But there was one area that they refused to skimp on, and Starbucks delivered it by the cupful.
Selling products, too
Starbucks also got some help from its retail division, home of packaged products like Tazo-branded K-Cups. That the company sold more K-Cups isn't a surprise, given the popularity of Green Mountain Coffee Roasters' Keurig machine. Still, this holiday season saw Starbucks launch its competing product, called Verismo. Initial sales of about 150,000 Verismo brewers contributed to a 13% jump in retail segment revenue, to nearly $400 million. The company called it a "successful" launch, and the numbers seem to back up that bullish reading.
Solid results on both the retail side and in U.S. locations are important for another reason: They add confidence to Starbucks' aggressive growth forecast.
The coffee titan plans to open 600 new stores in its Americas region this year, mostly in the U.S. And that's just the start. Management's strategy calls for 1,500 new locations in the U.S. over the next five years. Sales growth at the pace Starbucks has been booking suggests that's possible, that the market isn't nearly saturated yet.
And Starbucks' ambitious plans for its retail channel also look more achievable in light of this quarter's success. Expectations are for the division to eventually rival Starbucks' stores in terms of size and profitability. With the company calling for retail to post double-digit revenue increases for the year, that long-term forecast seems to be on track.
It's steady as she goes for Starbucks, one solid quarter at a time.
What's brewing now?
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The article Starbucks Dazzles With More of the Same originally appeared on Fool.com.Fool contributor Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool recommends Green Mountain Coffee Roasters and Starbucks. The Motley Fool owns shares of Starbucks. 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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