Warren Buffett once said that he invested based on a fairly simple rule: "Be fearful when others are greedy, and be greedy when others are fearful." For all the rebounding that we've seen over the last five years, the retail market is still fearful. Businesses have been cutting prices to draw in hesitant consumers, the weakest brands have fallen by the wayside, and the forecast is for more of the same.

The National Retail Federation dropped its annual retail growth forecast for 2014 last week. Originally, the group had predicted retail sales to rise 4.1%, but now believes that the increase will be just 3.6%. Last year, sales rose by 3.7%, making the 2014 rise a bad point on the overall trend line.

Even with things looking dour, though, Starbucks (NASDAQ:SBUX) has continued to soldier forth. The company has been increasing same-store sales, expanding its lineup, and even raising prices. While the rest of the market may be fearful, Starbucks looks to be full on confidence.

The downturn expansion
Starbucks is planning to add 1,550 stores this year around the globe, including 650 in the Americas. It's a pace that even growing businesses like Dunkin' Brands (NASDAQ:DNKN) are having a hard time matching. The doughnut king's Dunkin' Donuts brand is planning to add just 400 U.S. stores this year, a plan that seems a bit greedy given the company's lackluster sales growth.

Starbucks has been able to push for big growth for two reasons. First, its sales keep rising, with comparable sales up 7% in the U.S. over its last quarter. That's driven an increase in the coffers, with operating cash flow up 28%, according to the business. In turn, that cash allows the company more freedom to expand as it sees fit.

Second, Starbucks has expanded its offerings, allowing it to compete in new ways and in new areas. The business has made selling more in the middle of the day a primary focus. It's met this need by increasing its food offerings through the acquisition of La Boulange Bakery and the expansion of its sandwich and prepared foods menu.

It's that sort of move that has kept Starbucks ahead of businesses like Dunkin' Donuts, which managed a mere 1.8% increase in its comparable sales last quarter. Dunkin' also sees the need for a wider range of options, but it's still working to lock down the breakfast category, which is under pressure from gas stations and fast-food retailers.

The value of expansion at Starbucks
Starbucks' push for new locations is going to keep its sales growth piping hot. Breaking down its recent same-store sales growth, the company saw most of its increase from an increase in average ticket prices. That's growth that the company can sustain, even in slower markets, by pushing its food menu.

Starbucks is being greedy because it's holding on to the top spot, and greed now cements that success for the future. Each new store puts more pressure on competitors like Dunkin' Donuts and each new food item offers customers a reason to cross the street in the morning and walk through a Starbucks-branded door.

Investors should look at Starbucks' expansion as a strategy for all strong companies to follow. The consumer market may be working its way through a tough time, but that doesn't mean that everyone is in the same boat. Starbucks is one of the brands that is keeping the pressure on, and that's going to pay off as growth continues to seep back into the market.

Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends and owns shares of 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.


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