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Starbucks Is Set for 2014

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If there were a bar where companies hang out, Starbucks (NASDAQ: SBUX  ) would be the confident girl by the bar getting all the horrible pickup lines while waiting for her friend. The coffee company has been absolutely caning over the last 12 months; with the stock up 39% since the beginning of 2013, Starbucks is easily beating out the S&P 500 return over the same period.

Yesterday, investors got more good news, with Starbucks announcing earnings per share of $0.71, above the market's expectations. Revenue came in just shy of estimates, but investors seemed to be OK with that. Shares rose slightly after-hours.

What Starbucks is doing right
There are a very few things that don't make it onto the list of things that Starbucks has done well with, recently. New drinks, more food, integrating the Teavana and Boulange brands, and cost management have all gone Starbucks' way. In the most recent quarter, the company opened its second Teavana Tea Bar and concluded its ongoing legal battle with Kraft, now Mondelez (NASDAQ: MDLZ  ) . More on that later.

Sales were bolstered by an increase in foot traffic and strong demand for Starbucks brand products around the holidays. CEO Howard Schultz said, "Successful holiday sales around the globe drove healthy growth in comparable store sales." Indeed, comparable-store sales grew 5%, with the bulk of that coming from an increase in visitors.

Clearly, Starbucks has cracked the customer code, and now it's reaping the rewards. Schultz and the management team reaffirmed the company's 2014 targets, putting the company on track for another solid year.

The end of a drawn-out conflict with Kraft
On the ugly side of the investment coin, Starbucks ended up losing out to Kraft in its conflict over a deal gone sour. Starbucks and Kraft broke things off in 2010, but Kraft wasn't happy with the breakup. After a long bout of arbitration, Kraft came out on top, and Starbucks was ordered to pay the food giant $2.75 billion. 

In addition to the corporate payout, Starbucks is now being sued by a group of shareholders for $2.8 billion. The shareholders claim Starbucks "grossly understated the impact of the contract breach in the company's financial filings with the SEC." There's plenty of time left for that to be sorted out, but more legal woes aren't high on the list of things any company wants to deal with.

A good-looking 2014
Starbucks is set up for an excellent 2014, and with an increasing focus on food and its new tea options, the company used 2013 to open up a whole world of opportunity. Over the year, look for food sales to rise as the products make their way into more stores. Also, keep an eye out for an expanded Via instant coffee line. The company released its first Via latte at the beginning of the year, and that could be a big new space for them. I'm still bullish on Starbucks, and this past quarter was right in line with expectations.

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Andrew Marder

Andrew Marder worked in retail for years, holding jobs ranging from bookseller to bank strategy analyst. He has worked for the Motley Fool since 2012, and loves coffee.

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