Starbucks impresses

Starbucks results, which we promised you yesterday. Here they are, we review the companies fourth quarter release. That is available on their IR site: Starbucks Q4 EPS Rises 37% to a Record $0.63 Per Share. Everyone I know loves coffee. I often say that it is the only legal daytime drug that nobody frowns at just yet. The bean originated in Ethiopia. No wonder they run so fast, those Ethiopians! One of the most legendary companies from yesteryear, the Dutch East India Company, was the first commercial business to import the product into Europe heavily. And the rest, as they say in the classics, is history. Coffee struggled against tea in Britain, but across Europe and much of North America, coffee consumption and finding your favourite brew has reached obsessive levels. And that is why companies like Starbucks have benefitted.


Locally the Vida-e guys have done a pretty good job, they are a favourite! The big growers, Brazil, Vietnam, Ivory Coast and Indonesia, you need a very warm climate to grow these beans. Consumers? Well, on a per capita basis the Scandinavians absolutely smoke everyone, the folks in Finland drink double the coffee that the Italians drink. Amazing. And to think that the Italians drink 50 percent more coffee than the Americans. So now you can understand how and why some of the developed markets that Starbucks operate in are still growth markets. Is coffee bad for you though? Too much of everything no doubt is bad for you. Recent studies suggest that the bias is that a little of it is not bad for you. Caffeine increases your attention. It is suggested that it also increases memory performance. There is a little about the brew that you possibly love so much.


Starbucks is in growth mode, the last annual report suggests that the company would like to get to 20 thousand outlets across six continents by next year, that would be an around 12 percent increase in number of outlets during the course of this year. These outlets employ roughly 10 people each. You want the barista to know your special brew, be it a skinny Latte Macchiato with a shot of hazelnut syrup and topped with cream, or a Flat White with wings. The more you order, the more the barista knows about you. Coffee is a personal thing. The fastest growth in stores opening are in China and the US, during the quarter alone 558 stores were opened. And in both China and Japan the number of stores grew to beyond 1000. Total store stand at 19767 as at the end of September 2013, their financial year. Simple math tells me that they may actually be beyond that 20 thousand mark.

Starbucks gave guidance for 2014, earnings per share is expected to be between 2.55 and 2.65 Dollars. The annual dividend is currently 1.04 Dollars per share. Operating margins are set to improve by between 150 to 200 basis points. Store opening, heck, those are not slowing down, with more than 1500 expected to open during the period. China, Japan, South Korea and North America. Those numbers are pretty decent, the share price closed at an all time high yesterday, at 81.05. A 30 multiple! That is crazy expensive. But expectations are for the business to grow earnings by twenty percent for the next three years. Stores are expected to grow by another 50 percent from here to the end of the decade. By then coffee drinking habits of Americans and Southern Europeans (perhaps not yet the rich Asians; Japan, South Korea and Urban Chinese) will be much higher. Were stay long Starbucks and continue to buy.