Starbucks' Earnings: Is the U.S. Growth Story Losing Steam?

Why investors shouldn't worry about a recent slowdown in customer traffic.

Jul 22, 2014 at 1:11PM

How long can Starbucks (NASDAQ:SBUX) keep posting sales gains in its biggest and most mature market? For bears, the answer to that question is always "not much longer." However, judging by the stock's 13% rise this year, shareholders aren't very concerned.

But lately we've seen some solid evidence to feed that slowdown worry: Starbucks' customer traffic growth in the U.S. has fallen in each of the last three quarters. Transaction volume hit a massive 7% improvement a year ago but rose at the mere-mortal pace of just 2% last quarter.

Sbux Transactions

Source: Company financial filings.

Still, it would be a mistake to bet on Starbucks' growth streak ending anytime soon. The company is likely to keep posting industry-thumping sales gains, despite those worrying short-term results. 

A boost from food
In fact, Starbucks probably got a lift this quarter from its latest push into food. That category hasn't posted exciting results recently, accounting for just 20% of sales last year and 19% in each of the prior three years.

Only one-third of customers typically buy any food along with their drinks at Starbucks, making it a beverage retailer above all else. But here's the good news for investors: That's starting to change. 

Sbux Food

Management credited newly introduced La Boulange food products like breakfast sandwiches and baked treats with adding 2 percentage points to comparable-store sales growth last quarter. And that 2-point gain is likely just the start. Starbucks still has a significant percentage of its locations left to include in the La Boulange rollout, which should push breakfast transaction levels higher. 

And after that, management plans to switch its focus to the lunchtime hours, where the opportunity is arguably even bigger. Starbucks has already seen a boost from its panini sandwiches and Bistro Box products in the traditionally slower early-afternoon hours. Comps growth has been strongest in the 11 a.m.-1 p.m. time period, the company told investors last month.


Notably, that boost came before the effects of the La Boulange rollout or the upgraded lunch program that the company has planned for the quarters ahead. Starbucks' evenings program, which includes beer and wine sales in the later hours, could help too -- although it will only be scaling up to a small portion of the store base.

What to watch for
Analysts are expecting Starbucks to post an impressive 20% profit improvement when it announces earnings results on Thursday, July 24. Sales should rise by 11% and hit $4.1 billion. Beyond those headline numbers, investors should pay close attention to the growth in transaction volume and check average that Starbucks reports for its U.S. market. Those figures should both benefit from food initiatives that are drawing more customers into the cafes.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Demitrios Kalogeropoulos owns shares of Apple and Starbucks. The Motley Fool recommends and owns shares of Apple 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

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.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

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. The show is also heard weekly on dozens of 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. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers