In the latest Dueling Fools on Starbucks
Fools can read the Duel for further insight into the type of growth already priced into the shares; meanwhile, Starbucks will likely do its best to keep rapid growth chugging along for as long as possible. As Alyce pointed out, that includes selling more than just coffee, as Starbucks has begun to move into the entertainment world with its Hear Music division, among other initiatives.
Starbucks is also branching into books. What started with the children's book The Little Engine That Could will shift to the adult world, with an Oct. 3 offering of Mitch Albom's For One More Day.
So what do these non-beverage initiatives mean for Starbucks going forward? Beside the coffee and food offerings, not much. According to the company's latest 10-K, its fiscal 2005 sales mix was as follows: 77% beverages, 15% food, 4% coffee beans, 4% coffee-making products and other merchandise. In other words, beside coffee and food, the multimedia offerings don't make much of a dent on the top line, or bottom-line profitability for that matter. Sure, they could go gangbusters, but that would still do little to boost overall results until they grow to a higher proportion of sales.
Rather than tracking which CD or book Starbucks uses to grab headlines, investors would be better advised to track overall coffee and food growth, same-store sale trends, new store openings, and free cash flow generation, all of which are currently impressive. Keeping tabs on the competition is another key consideration. Caribou Coffee
Multimedia may add a couple of points to same-store sales growth. But for the time being, the company's overall health will have little to do with how well "Starbooks" turns out. Barnes & Noble
For related Foolishness:
- Dueling Fools: Starbucks
- Dueling Fools: Starbucks Bull
- Dueling Fools: Starbucks Bear
- Dueling Fools: Starbucks Bull Rebuttal
- Dueling Fools: Starbucks Bear Rebuttal
- Vote for the winner!
Fool contributor Ryan Fuhrmann is long shares of Starbucks and Mickey D's but has no financial interest in any other company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.