The single most important variable to consider when evaluating a company´s long term growth prospects is the quality of its management team. Amazon (NASDAQ:AMZN), Starbucks (NASDAQ:SBUX) and Chipotle (NYSE:CMG) are led by successful entrepreneurs who deeply understand each company´s long term vision and growth divers.
Amazon, the disruptor
Amazon is unquestioningly the most disruptive force in the retail industry over the last decade, and the company would hardly be what it is if it weren't for its founder and CEO, Jeff Bezos. Bezos is all about long-term growth, driving Amazon to be as competitive as possible when it comes to product pricing in order to gain market share in different retail categories at the speed of light.
In addition to that, under Bezo´s leadership the company is heavily investing in areas like building its warehouses, digital content and cloud computing services among others. This creates an additional drag on profitability, and Amazon is operating with razor-thin, or even negative, profit margins as a result.
But Wall Street doesn´t seem to be too concerned about that, Amazon has recently reached new historical highs in the area of $368 per share after reporting better than expected sales figures with a 24% yearly increase for the third quarter of 2013. Even if the company lost money during the quarter, investors believe in Jeff Bezos and his long-term vision for the company.
Importantly, Bezos puts his money where his mouth is. The executive received only $81,840 in salary during 2012, which makes him one of the lowest-paid CEOs among leaders of large technology companies. Bezos is well aligned with shareholder's interest by his ownership of nearly 87 million Amazon shares, and this means that he will prosper financially as long as other Amazon investors prosper too.
Starbucks: much more than coffee
Howard Schultz has led Starbucks from a small group of coffee stores in Seattle to a global chain with 19,767 stores as of the end of the last quarter and one of the most valuable brands in the industry. Schultz practically invented specialized coffee as a popular product category, and he has been enormously valuable in terms of building the brand and its differentiated customer experience through the years.
If that weren't enough, in 2008 he returned to the role of CEO after an eight-year pause to reinvigorate the company and turn its financial performance around. The company was over expanding back then and the Starbucks experience was becoming watered down. As a result financial performance was decaying too.
Since Schultz reclaimed his throne, the company refocused on what matters most: providing high quality products and a superior customer experience. Both customers and shareholders have enormously benefited by Schultz´s return, and they should feel comforted by the fact that he is managing the company's expansion without losing sight of those differentiating factors that make Starbucks much more than a simple coffee store.
The company is growing into new areas like specialized tea, pastry and premium juice with acquisitions like Teavana, La Boulange and Evolution Fresh respectively. Luckily for Starbucks investors, Shultz is an invaluable asset when it comes to leading these growth initiatives while at the same time keeping focus on the essential attributes of the Starbucks experience and brand.
Chipotle is hot and spicy
Steve Ells opened the first Chipotle Mexican Grill restaurant in Denver, Colorado, in 1993 and he has built a national brand with more than 1,500 stores from that single location. Chipotle is a growth leader in the fast casual category, the company has delivered compounded annual sales growth of more than 20% over the last 5 years and earnings per share have increased at a mouth watering 32.7% in the same period.
Chipotle has remained true to its founder's vision during the expansion process, the company's "food with integrity" approach to tacos and burritos may create operational complexities and higher costs, but customers seem to really appreciate better ecological standards and the high quality ingredients that come with it.
Even as growth has understandably slowed down a bit as the company gains size, this burrito company is still burning hot: revenue grew by 18% in the last quarter fueled by a 6.2% increase in comparable restaurant sales, and earnings per share increased by 17.2% versus the same quarter in the previous year.
Management expects to open between 180 and 195 restaurants in 2014 from a current base of 1,539 locations. Considering how strong demand has proven to be over the years, the company still has a lot of room for expansion in the coming years, both in the U.S. and abroad.
Founder CEOs usually have a deep understanding about the company and its success drivers. Companies like Amazon, Starbucks and Chipotle are led by successful entrepreneurs with savvy long-term visions for growth, which makes them invaluable assets for investors.