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Starbucks (SBUX) Up 41% in the Past Year: More Room to Run?
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Starbucks Corporation (SBUX - Free Report) is poised to benefit from menu innovation, solid comps growth and expansion initiatives. Also, a focus on digitization bodes well.
Shares of Starbucks have rallied 41% in the past year compared with the industry’s 34.1% growth. An upward revision in earnings estimates for 2023 reflects analysts’ optimism regarding the company’s growth potential. In the past 60 days, the Zacks Consensus Estimate for fiscal 2023 earnings has moved up 0.9% to $3.43 per share.
Major Growth Drivers
Starbucks is strengthening its product portfolio with significant innovation in beverages, refreshments, health and wellness, tea and core food offerings. SBUX is leaning toward fast-growing categories like Cold Brew, Draft Nitro beverages and plant-based modifiers, including almond, coconut, and soy milk alternatives.
Image Source: Zacks Investment Research
Apart from numerous beverage innovations, Starbucks has been making an effort to offer more nutritional and healthy products to its customers. Starbucks’ collaboration with Beyond Meat to roll out a plant-based lunch menu in China is a testament to the same.
In February 2023, the company launched the Starbucks Oleato range of beverages available in 650 stores across Italy, Japan and the United States. The range of beverages received a fair amount of success due to which the company plans to expand its availability in more markets in 2023.
Starbucks witnessed solid comps growth in all its operational segments in the second quarter of fiscal 2023, attributable to an increase in comparable transactions and the average ticket. In the reported quarter, North America comps grew 12% due to a 6% rise in comparable transactions and a 5% increase in the average ticket.
International comps also grew 7%, driven by a 7% increase in comparable transactions. Global comps increased 11%, mainly because of a 6% rise in comparable transactions and a 4% increase in the average ticket.
Starbucks is one of the most recognized coffee brands in the world. Management has been focused on increasing the global market share by judiciously opening stores in new and existing markets, remodeling existing stores, deploying technology, controlling costs and aggressive product innovation and brand building.
In the second quarter of fiscal 2023, the company opened 464 net new stores globally, reflecting a total store count of 36,634. During fiscal 2023, SBUX expects the store count in the United States and China to grow approximately 3% and 13%, respectively, on a year-over-year basis. The company expects global store growth of nearly 7%.
Starbucks is focusing on digitalization to boost growth. The company’s partnership with Alibaba for providing a seamless Starbucks Experience continues to drive growth in China.
Starbucks has introduced its mobile order and pay feature — Starbucks Now — to multiple platforms in the Alibaba Digital Economy, which includes Taobao, Amap, Koubei and Alipay. The company made progress in personalized digital relationships to expand its reach with members. This includes program enhancements like Stars for Everyone.
SBUX is exploring the blockchain platform for ways to connect the Starbucks Rewards program with other merchant reward programs, coupled with the motive of the tokenization of stars. The initiative paves a path for the exchange of value across brands, enhanced digital services and swapping other loyalty points for stars. Going forward, the company is likely to highlight this format as it is likely to serve as the foundation for a new modern payment that aligns expenses with the value received by customers and merchants.
Concerns
Starbucks is facing restrictions in its potential growth due to persisting inflationary pressure related to the commodity and supply chain. In the fiscal second quarter, general and administrative expenses increased 28.8% year over year to $620.4 million. The upside was mainly driven by investments in technology, higher performance-based compensations, increased support costs of strategic initiatives (including the Reinvention Plan) and higher costs related to partner wages and benefits.
The company anticipates inflationary pressures to persist for some time. In fiscal 2023, our model predicts total operating expenses to rise 10.3% year over year.
Zacks Rank & Key Picks
Starbucks currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Retail-Wholesale sector are as follows:
The Zacks Consensus Estimate for Chipotle’s 2024 sales and EPS suggests growth of 12.6% and 19.8%, respectively, from the year-ago period’s levels.
Chuy's Holdings, Inc. sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of CHUY have increased 100.9% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 9.9% and 27%, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth rate of 9.5%. The stock has rallied 33.4% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests growth of 13.4% and 4.4%, respectively, from the year-ago period’s levels.
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Starbucks (SBUX) Up 41% in the Past Year: More Room to Run?
Starbucks Corporation (SBUX - Free Report) is poised to benefit from menu innovation, solid comps growth and expansion initiatives. Also, a focus on digitization bodes well.
Shares of Starbucks have rallied 41% in the past year compared with the industry’s 34.1% growth. An upward revision in earnings estimates for 2023 reflects analysts’ optimism regarding the company’s growth potential. In the past 60 days, the Zacks Consensus Estimate for fiscal 2023 earnings has moved up 0.9% to $3.43 per share.
Major Growth Drivers
Starbucks is strengthening its product portfolio with significant innovation in beverages, refreshments, health and wellness, tea and core food offerings. SBUX is leaning toward fast-growing categories like Cold Brew, Draft Nitro beverages and plant-based modifiers, including almond, coconut, and soy milk alternatives.
Image Source: Zacks Investment Research
Apart from numerous beverage innovations, Starbucks has been making an effort to offer more nutritional and healthy products to its customers. Starbucks’ collaboration with Beyond Meat to roll out a plant-based lunch menu in China is a testament to the same.
In February 2023, the company launched the Starbucks Oleato range of beverages available in 650 stores across Italy, Japan and the United States. The range of beverages received a fair amount of success due to which the company plans to expand its availability in more markets in 2023.
Starbucks witnessed solid comps growth in all its operational segments in the second quarter of fiscal 2023, attributable to an increase in comparable transactions and the average ticket. In the reported quarter, North America comps grew 12% due to a 6% rise in comparable transactions and a 5% increase in the average ticket.
International comps also grew 7%, driven by a 7% increase in comparable transactions. Global comps increased 11%, mainly because of a 6% rise in comparable transactions and a 4% increase in the average ticket.
Starbucks is one of the most recognized coffee brands in the world. Management has been focused on increasing the global market share by judiciously opening stores in new and existing markets, remodeling existing stores, deploying technology, controlling costs and aggressive product innovation and brand building.
In the second quarter of fiscal 2023, the company opened 464 net new stores globally, reflecting a total store count of 36,634. During fiscal 2023, SBUX expects the store count in the United States and China to grow approximately 3% and 13%, respectively, on a year-over-year basis. The company expects global store growth of nearly 7%.
Starbucks is focusing on digitalization to boost growth. The company’s partnership with Alibaba for providing a seamless Starbucks Experience continues to drive growth in China.
Starbucks has introduced its mobile order and pay feature — Starbucks Now — to multiple platforms in the Alibaba Digital Economy, which includes Taobao, Amap, Koubei and Alipay. The company made progress in personalized digital relationships to expand its reach with members. This includes program enhancements like Stars for Everyone.
SBUX is exploring the blockchain platform for ways to connect the Starbucks Rewards program with other merchant reward programs, coupled with the motive of the tokenization of stars. The initiative paves a path for the exchange of value across brands, enhanced digital services and swapping other loyalty points for stars. Going forward, the company is likely to highlight this format as it is likely to serve as the foundation for a new modern payment that aligns expenses with the value received by customers and merchants.
Concerns
Starbucks is facing restrictions in its potential growth due to persisting inflationary pressure related to the commodity and supply chain. In the fiscal second quarter, general and administrative expenses increased 28.8% year over year to $620.4 million. The upside was mainly driven by investments in technology, higher performance-based compensations, increased support costs of strategic initiatives (including the Reinvention Plan) and higher costs related to partner wages and benefits.
The company anticipates inflationary pressures to persist for some time. In fiscal 2023, our model predicts total operating expenses to rise 10.3% year over year.
Zacks Rank & Key Picks
Starbucks currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Retail-Wholesale sector are as follows:
Chipotle Mexican Grill, Inc. (CMG - Free Report) sports a Zacks Rank #1 (Strong Buy). CMG has a long-term earnings growth rate of 31.8%. The stock has improved 64.7% in the past year. You can see the complete list of today’s Zacks Rank #1 stocks here.
The Zacks Consensus Estimate for Chipotle’s 2024 sales and EPS suggests growth of 12.6% and 19.8%, respectively, from the year-ago period’s levels.
Chuy's Holdings, Inc. sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 23.4%, on average. Shares of CHUY have increased 100.9% in the past year.
The Zacks Consensus Estimate for Chuy’s Holdings’ 2023 sales and EPS suggests growth of 9.9% and 27%, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth rate of 9.5%. The stock has rallied 33.4% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests growth of 13.4% and 4.4%, respectively, from the year-ago period’s levels.