Starbucks (NASDAQ: SBUX) is everywhere with a surprising number of outlets. The 1971-founded firm dominates retail coffee. Shares have returned 17,000% since 1994. Restaurant stock is 26% below its highest price as of this writing. Learn these three facts about this strong corporation before adding it to your portfolio.
1. Its growth plans Starbucks' $34.7 billion revenue last year shows its size. Even more astonishing, the company has 38,587 sites in 80 countries.
These numbers can make you think the company has little development potential. This is a false assumption. Analysts expect revenue to grow 9.1% annually over the next three fiscal years. Adding locations will contribute to this.
From 16,466 outlets, management wants 20,000 in the U.S. In China, where the biggest opportunity is, executives want to open 9,000 stores by fiscal 2025, a 29% increase from 6,975. The expansion plan emphasizes market densification. Drive-thru or delivery-only setups will be prioritized.
2. Economic moat Starbucks' long-term success depends on its economic moat, a notion popularized by Warren Buffett. A company's advantage makes it harder for competitors to compete.
Starbucks' greatest asset is their brand. Coffee and food sold by the firm may be commoditized. The corporation may charge higher pricing since its brand sets it apart. This explains why the company's gross margin has averaged 28.3% for a decade.
Starbucks has scale advantages and a valued brand. In comparison to lesser competitors, it has the buying power and bargaining leverage to get better commodity prices. The company's IT investments can help more stores and customers.
3. Digital basis Retailers must meet customers where they are. This involves improving digital capabilities so customers may order how they want. Since late 2009, Starbucks' excellent rewards program has done this. It has 34.3 million domestic 90-day active members.
Starbucks can gain another edge from their consumers' data in a digital environment. The insights can guide marketing and product development. Management achieves client loyalty and repeat purchases, the goal of any consumer-facing business. Rewards members make up 59% of company-owned sales in the U.S.
Our rising Starbucks Rewards members are visiting our stores more often and spending more each time," CEO Laxman Narasimhan stated on the 2024 first-quarter results call. Ultimately, it's about making Starbucks' items easier to order. This digital foundation will generate financial results for this consumer discretionary stock for years to come.
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