BREAKFAST WITH THE FOOL
Friday, November 19, 1999
"There's no reason to be the richest man in the cemetery. You can't do any business from there."
-- Colonel Sanders
Starbucks Grinds Out Fiscal 1999 Results
Brian Graney (TMF Panic)
Worldwide coffee marketer Starbucks Corp. (Nasdaq: SBUX) turned in its fiscal fourth quarter and full-year financial results late yesterday, which were marked by growth in the company's core retail store business. For the quarter, the Seattle-based firm posted EPS of $0.17, up 21% from a year ago and in line with the First Call mean estimate, on 33% year-over-year revenue growth. Same-store sales during the period were up 8%, and total retail sales climbed 40% to $406 million. For the year, Starbucks ended up with EPS of $0.54, matching reduced expectations following a midsummer earnings estimate revision.
From its mid-August lows of $19 7/8, Starbucks' stock has rallied by more than 50% over the past few months as investors have become more comfortable with the business' strategy going forward. In its earnings conference call last night, the firm played down the ambitious Internet strategy that had led to indigestion for some investors earlier this year. Instead, the company outlined some of the ways it plans to attract new customers to the Starbucks brand, inside its ubiquitous stores and also in other coffee-drinking environments.
The firm continues to expand its core retail store base, which grew by 33% in the past year thanks in part to stepped up international expansion. New store-level products are selling well, exciting mainstay customers and attracting new business. Outside of its retail stores, the company sees the opportunity to potentially double its office coffee business in the year ahead and expand into new retail settings, such as the Starbucks-branded "store-within-a-store" concept with supermarket chain Albertson's (NYSE: ABS) unveiled last week.
The Albertson's agreement could lead to similar deals with other supermarkets, offering a handy way to heighten awareness of Starbucks in-store products distributed through the firm's supermarket agreement with Kraft and its profitable Frappucino joint-venture with PepsiCo (NYSE: PEP). With the company focusing on execution in its core coffee business again, Starbucks appears to be well-positioned for another year of growth in fiscal 2000.
News to Go
Drug store chain Rite Aid (NYSE: RAD) detailed the reasons for the recent resignation of its auditor KPMG in a filing with the Securities and Exchange Commission, stating that the accounting firm had grown "unable to continue to rely on management's representations." The SEC has opened a formal investigation of the company, and the retailer is cooperating, according to a statement.
Wireless communications company Vodafone AirTouch (NYSE: VOD) launched a revised $137 billion takeover offer for Mannesmann AG, just days after the German mobile phone company rejected Vodafone's initial $106 billion offer.
Bookseller Borders Group (NYSE: BGP) reported a Q3 loss of $0.02 per share compared to a loss of $0.01 per share a year ago, which was not quite as bad as the loss of $0.05 per share expected by analysts surveyed by First Call. Sales at Borders.com nearly tripled year-over-year, while same-store sales at the company's namesake stores increased 6.6% during the period.
Network switching and access products maker Newbridge Networks (NYSE: NN) said it would cut more than 10% of its workforce, primarily in the areas of overhead and administration, as part of a restructuring of the company. Management also said that it is considering "all strategic options," including a possible sale of the company.