Starbucks (SBUX +0.55%) has bounced back nicely after economic lockdowns at the pandemic onset in 2020 crushed revenue. The international coffee retailer has almost all of its stores operating again, but it is still constrained by some restrictions meant to reduce the spread of COVID-19.
Despite not operating at full strength, Starbucks sales are now reaching above the levels they were at before the outbreak. The company's beverages remain popular with consumers, indicating that sales could keep growing as economies continue cautiously reopening.
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Starbucks' recovery is gaining momentum
Overall revenue increased by 78% year over year in Starbucks' most recent fiscal quarter to $7.5 billion. Increasing consumer mobility is helping fuel sales. Consumers are more likely to will stop at Starbucks and buy a coffee if they are already outside the home. CEO Kevin Johnson is counting on that trend, according to comments made during the most recent earnings conference call. He said: "Now, with customer mobility increasing, we are at the beginning of what we describe as the great human reconnection. The reopening of markets is translating to incredible increases in demand for Starbucks as people are again on the go, reconnecting, and socializing with one another."
This boost in sales is happening even though customers are still somewhat avoiding dining in Starbucks stores. Far more sales now come from drive-thru orders, mobile orders for pickup, and to-go orders. People are buying coffee inside a Starbucks but not socializing there as often. Of course, this is a result of the pandemic. But it also means that this part of the business can add another gear to speed the company's recovery efforts.
Moreover, one of the main characteristics of pandemic life -- remote work -- appears to be enduring longer than expected. Corporations big and small have tried and delayed calling employees back to offices several times. This is slowing down sales for some Starbucks because these workers are not stopping to pick up a coffee on their way to the office or during their breaks. When employees eventually return to offices, even if only for a few days per week, it should help boost revenue further at the coffee chain.
What this could mean for investors
In the long run, Starbucks will benefit as a leading player in a large and growing market. Indeed, the global addressable market for coffee is estimated to grow to over $400 billion in annual sales by 2024. That would be a compound annual growth rate of 8.5%. Management is confident that its premium brand and changing consumer tastes in favor of higher-quality coffee will be tailwinds that propel Starbucks to grow along with the market for several years.
Investors are starting to take notice of Starbucks' rebound and the stock price is up about 7.2% year to date and 29.8% over the past year. Still, it's not too late for long-term investors to add Starbucks stock to their portfolio.
