3 Signs Starbucks Will Continue to Amaze in 2014

Starbucks has beat everyone's expectations since Howard Schultz returned as CEO. Here's why investors can be confident that the trend will continue.

Apr 5, 2014 at 10:00AM

Starbucks' (NASDAQ:SBUX) stock price has been skyrocketing, driven by exceptional business performance. Since starting 2013 at $55 per share, the stock has risen to $75 per share -- a 36% increase in a little more than a year. The increase comes on the backs of 26% earnings-per-share growth and 7% comparable-stores sales growth in 2013. There are three signs that Starbucks' business -- and its stock price -- will reach new highs in 2014 as it executes its growth strategy.

U.S. comps continue to amaze
It seems like there is a Starbucks on every corner in the United States. A blogger calculated that more than 80% of Americans live within 20 miles of a Starbucks. Usually, market saturation results in slowing growth as the opportunity to open more stores dwindles. However, Starbucks has exceeded expectations by stringing together four straight years of comparable-store sales growth companywide, including four straight years of comparable sales growth in U.S. stores.

Sbux Comps

Source: Starbucks press releases

More importantly, most of the comparable store growth has come from traffic increases, with average ticket increases making up only about a third of the growth. This means that more people are going to Starbucks more frequently -- great news for shareholders.

In addition, Starbucks is doing a number of things to boost the average ticket price. For instance, it is rolling out gourmet sandwiches and pastries to all of its U.S. stores this year. If people grab a croissant along with their morning coffee, the average ticket will increase. In addition, the food menu could help draw customers back into the stores for the lunch hour, increasing traffic. As a result of this and other initiatives -- like selling alcoholic beverages and allowing mobile payments -- Starbucks U.S. comparable-store sales are set to continue robust growth throughout 2014.

(NASDAQ:DNKN)

Moreover, mobile payments also allow Starbucks to track customer behavior, giving it access to vital data that was once only available to credit card companies. It can use the data to tailor its customers' experience, such as delivering relevant coupons and seizing on trends in spending patterns. As Starbucks continues to innovate along the mobile front, its bottom line will continue to grow.

Huge growth potential in Asia
Starbucks may be focusing on comparable sales growth in the U.S., but it is rapidly expanding its store count in Asia. During the company's first-quarter 2014 conference call, CEO Howard Schultz reminded investors that, with 1,000 stores just 15 years after it entered the country, China is on track to become Starbucks' largest market outside of the U.S.

The China and Asia Pacific segment is comprised of more than 4,000 stores; the company added 209 stores in the region in the first quarter of fiscal 2014 -- a 5% increase in just one quarter!

It is not hard to see why Starbucks is adding so many new Asian locations. Comparable-store sales growth topped 9% in 2013. Moreover, established Asian locations' annual pre-tax earnings top 75% of the investment required to build a new store; this means that each new store can be counted on to generate an outstanding return on investment within a short time. As a result, Starbucks' growth in Asia will continue to be expansive and profitable for many more years.

Takeaway
Much has been made about Starbucks' astronomical stock price; it trades at 27 times consensus 2014 earnings per share. However, with earnings growing at a double-digit pace and all signs pointing toward that trend continuing, Starbucks' stock price appears to just be keeping up with Starbucks' business results. This is not a stock for investors looking to score a bargain, but Starbucks' strong business performance makes it a good candidate for growth investors looking for a fairly priced stock that has significant upside.

3 stocks poised to be multi-baggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multi-bagger stocks time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

Ted Cooper has no position in any stocks mentioned. The Motley Fool recommends McDonald's and Starbucks. The Motley Fool owns shares of McDonald's and 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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers