By the Numbers: 3 Companies With Strong Growth Potential
Same-Store sales growth can be an important indicator to watch as it provides significant information about the march of the business and the company´s long term growth prospects. When new store openings are combined with growing sales at previously existing stores, then things look quite interesting in terms of growth potential.
These companies are firing on all cylinders and, according to the numbers, they have plenty of room for further growth.
Whole Foods has benefited enormously from the trend toward healthier eating habits in the last years. The company has compounded sales growth at more than 15.8% annually over the last five years, and its focus on high quality natural and organic food products generates superior pricing power and above average profit margins for shareholders.
The company has ambitious growth plans; management believes there is room for 1,000 Whole Foods stores in the U.S. alone in comparison to 355 stores at the end of the last quarter. However, the company operates in a niche segment, and competition has been increasing lately, so investors may be wondering if Whole Foods has the strength to continue expanding at a vigorous rate or if the best growth years are already in the past.
Judging from financial figures, this growth story is far from over. During the last quarter sales at Whole Foods increased 12% to $3.1 billion, comparable-store sales increased 7.5%, and identical store sales, excluding four relocations and one expansion, increased by 7.2%.
For the 40-week period ended July 2013, sales increased 13% to $9.9 billion, and comparable store sales grew by 7.2%. This was translated into an increase of 18% in EBITDA and a jump of 20% in earnings per share versus the previous year.
As Whole Foods expands its store base, comparable-stores sales continue performing strongly. New openings are not cannibalizing existing stores, even in the face of growing competition. This says a lot Whole Foods, its competitive advantages and long term growth potential.
At the end of the last quarter Starbucks owned more than 19,200 stores on a global basis, and the U.S. market is looking quite crowded with more than 12,000 Starbucks stores. On the other hand, the numbers show that the company still has plenty of room for growth via new products in the U.S. and store openings in emerging markets.
Total net revenues increased 13% in the last quarter, supported by an 8% increase in comparable-store sales. Importantly, store traffic was particularly strong during the quarter, transactions increased by 7% and higher prices accounted for the remaining 1% increase in comparable-store sales.
Performance was especially encouraging in the U.S: Starbucks reported a 9% increase in comparable-store sales due to a 7% growth in transactions and a 2% increase in prices. Product innovation and more food offerings are doing wonders for Starbucks shareholders in the U.S., where there is limited room for store growth.
On the other hand, a growing store base will be the main growth driver in China, where the company is on track to 1,000 stores this year. Management believes that the Asian giant will become the company´s second biggest market in the short term, and the numbers are supportive of that thesis.
The China/Asia Pacific region saw an increase of 29% in revenue for the last quarter versus the prior year. A 9% growth rate in same-store sales is proving that consumers in the region are quite avid for Sawbucks and its products.
Chipotle Mexican Grill started from a single store in Denver, Colorado, in 1993 and the company has grown to become a national brand with more than 1,500 stores since then. Chipotle´s "food with integrity" approach to Mexican cuisine resonates remarkably well among consumers, and the company still has a lot of room for growth in the middle and long term.
Revenue during the last quarter increased by 18.2% year-over-year backed by strong same-store sales growth of 5.2%. The company opened 44 new restaurants during the quarter, and management expects to end 2013 with between 165 to 180 new openings. Chipotle has plenty of room for expansion in the U.S. before reaching saturation point, and international markets are practically untapped.
In addition to that, Chipotle is replicating its simple and effective business model with its new ShopHouse Asian restaurants. If this new concept achieves a somewhat similar level of success to what Chipotle has done over the last years, it could be major growth driver in the future.
Founder and CEO Steve Ells has proven an exceptional ability when it comes to leading the company´s expansion without sacrificing product quality and its focus on fresh and natural ingredients. As long as the company keeps mantains those standards, Chipotle has many years of outstanding growth ahead of it.
Growing same-store sales show that new openings are not hurting sales at existing stores, and this is an important reflection about customer demand and long term growth possibilities. According to this metric, companies like Whole Foods, Starbucks and Chipotle are still offering plenty of potential for growth over the next years.
The article By the Numbers: 3 Companies With Strong Growth Potential originally appeared on Fool.com.Andrés Cardenal has no position in any stocks mentioned. The Motley Fool recommends Chipotle Mexican Grill, Starbucks, and Whole Foods Market. The Motley Fool owns shares of Chipotle Mexican Grill, Starbucks, and Whole Foods Market. 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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