3 Things to Watch For in Starbucks' Earnings

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Starbucks (NASDAQ: SBUX  ) reports earnings after the market closes on Thursday, Jan. 24. Here's what you need to watch for in the results.

Expectations, meet reality
The first question that tends to dominate in the moments after earnings come out is whether the company met the Street's expectations. Analysts see the coffee giant booking $0.57 a share in profits, on $3.84 billion in revenue. That would represent 14% higher earnings and a 12% sales bump.

By comparison, Starbucks turned in 16% revenue growth and 11% earnings growth in the equivalent quarter last year. But that performance was powered by a scorching 9% bump in comparable-store sales. Comps are trending a bit lower lately -- 7% last quarter -- and so a repeat performance at that level is unlikely.

Verismo, meet the market
Starbucks introduced its Verismo home-brewing coffee system this holiday season. And with it, the company is taking aim at the profitable single-serve coffee market now dominated by Green Mountain Coffee Roasters (UNKNOWN: GMCR.DL  ) and its uber-popular Keurig machine.

Green Mountain's crazy sales growth has come back down to earth recently, falling to 33% from the 75% it booked for much of 2011. But that doesn't mean the market will be easy pickings for Starbucks. In fact, discounts over the holiday season suggest that Verismo sales might be less than brisk. We'll find out when Starbucks updates investors on the machine's sales momentum.

Ambitious growth
Starbucks announced aggressive growth plans last month. Those include:

  • Opening new stores -- 3,000 new stores in the Americas region over the next five years, including more than 1,500 in the United States.
  • Selling more packaged goods -- the packaged goods segment, where Starbucks brands are sold at retailers, turned in $1.3 billion in revenue last year. And the company expects it to eventually "rival Starbucks retail store portfolio in terms of size and profitability."
  • Transforming the tea industry -- attack the $40 billion global tea market, armed with its new acquisition of Teavana.

Investors will get a critical update on those growth plans. Key to the company's store expansion, for example, will be the comparable sales growth it reports in the U.S. market. Those comps need to stay in the high single digits to justify Starbucks' lofty store expansion goals.

The retail space is in the midst of the biggest paradigm shift since mail order took off at the turn of last century. Only the most forward-looking and capable companies will survive, and they'll handsomely reward investors who understand the landscape. You can read about the 3 Companies Ready to Rule Retail in our special report. Uncovering these top picks is free today; just click here to read more.

Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2205566, ~/Articles/ArticleHandler.aspx, 9/28/2016 10:16:31 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 18,269.91 41.61 0.23%
S&P 500 2,161.72 1.79 0.08%
NASD 5,310.95 5.24 0.10%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/28/2016 9:40 AM
SBUX $53.69 Down -0.50 -0.92%
Starbucks CAPS Rating: ****
GMCR.DL $0.00 Down +0.00 +0.00%
Keurig Green Mount… CAPS Rating: **