Brewing stellar numbers

Yesterday evening we received second quarter results from Starbucks which came in line with expectations. Comparable store sales were up 6%, revenues grew 9% to $3.9 billion and operating income increased 18% to $644 million. Margins increased nicely by 130 basis points to a healthy 16.6% which is a record for the second quarter. Earnings per share came in at $0.56 which is up 17%. Earnings for the full year are estimated to come in at $2.66 for 2014 and $3.17 for 2015. That puts the stock on a 2014 PE of 27. But as you can see earnings are expected to grow by 19% which puts the stock on PE to Growth ratio (PEG) of 1.42 which is reasonable. The closer to 1 the better.


The company is expecting big things. Here is what the highly publicised CEO Howard Schultz had to say about the quarter.


"Starbucks record operating performance in Q2 demonstrates that our focus on building a different kind of company - performance driven, through the lens of humanity - continues to drive profits and shareholder value. The innovation we are bringing to market through reinvention of our Teavana business and partnership with Oprah Winfrey, our reimagination of the Starbucks Experience through next-generation payment and loyalty programs and our continued investments in the over 200,000 Starbucks partners who wear the green apron every day continues to build equity in the Starbucks brand and strengthen our connection to customers in every market in which we operate."


In case you are wondering, Teavana is their tea business. They really are excitingly innovative and operate in a coffee world which is growing fast. Regionally the growth we have seen in sales is well represented in all their regions Although the US still represents the bulk of sales (72%). The America's grew sales by 6%, EMEA (Europe, Middle East and Africa) grew by 6% and Asia grew by 7%. Even in developed markets the uptake of good branded coffee is huge at the moment.


They are growing their food services focusing on both breakfast and lunch, they are diversifying into tea, juices and possibly Soda Stream and of course growing and innovating with their core coffee business. They are leveraging all of these activities off their amazing brand power plus their global expansion is still in its infancy, we continue to add to this one.