FY numbers, store rollout continues

Starbucks reported results for their fourth quarter and full year last evening after the bell. The stock has had a pretty awful year-to-date performance, down 13 percent. Over the last decade however, the stock is up 183 percent. Coffee drinking is more than just that. For some people it is an art. Michael used to have a flatmate that took it to the nth degree, cold brewing overnight. Some people grow tomatoes, some people brew their own beer, some people roast their own coffee beans.

My only description for coffee and the attraction is that it is the only legal daytime drug that people yearn for, the smell, the taste and the buzz. Drip/Filter, plunger/French press, percolated or boiled (Turkish and Greek), you can take your coffee in multiple ways. According to the Caffeine Informer (there is such a website), the Coffee Crave Fearless Black comes with the most power. For the record, caffeine has a half life of 4-6 hours.

Coffee, according to the Wikipedia entry, was first drunk in Yemen around 400 odd years ago. Such was the popularity, that it quickly spread and the first European coffee houses were in Venice, the merchants importing vast quantities of the drink. I have actually been to a wonderful spot in Rome, near the Spanish steps called the Antico Caffe Greco, the second oldest cafe in all of Italy, after Caffe Florian in Venice. There were coffee houses in Damascus and Cairo long before the bean spread across the Mediterranean. Coffee actually has very little nutritional value. Two calories a pop. It is all the other stuff that you add that makes it a little more delicious and unfortunately full of calories. Drop the cream and the flavouring, OK?

Starbucks numbers for the quarter were a marginal beat, by a cent, the guidance for the next year was a little lower than the market was looking for. It is a massive operation. Let us look at the FY numbers, those are more important. For me anyhow, it takes away the volatility element of 14 weeks. Revenues increased 11 percent from the prior year to 21.3 billion Dollars. Operating income increased 16 percent to 4.2 billion Dollars, operating margins expanded 80 basis points to 19.6 percent. EPS increased by 4 percent to 1.90 Dollars.

Guidance, here it is quickly. Non-Gaap EPS is expected to be between 2.12 to 2.14, comparable store sales are expected to be higher in the mid single digits, overall revenue growth is expected to be in the low teens. And the group hopes to open around 2100 stores. That is roughly 40 stores a week, which in itself is an amazing feat when you look at all that goes into a store of this nature. They plan on opening three more of the big ones, the Starbucks Reserve Roastery and Tasting Room will open in New York, Shanghai and now Tokyo. To open in 2018. They look spectacular.

Astonishingly, they opened 2042 stores in the last financial year, including here for the first time. Other territories that got to taste the deliciousness of Starbucks for the first time were Cambodia, Kazakhstan, Luxembourg, Andorra, Slovakia, and Trinidad and Tobago. All around the world and in different places. I think that the growth trajectory of the company is clear, they want to operate in multiple territories and make sure that they become the number one quick service restaurant in your neighbourhood. They now operate in 75 countries around the world.

At 52.5 Dollars, with expectations of 2.14 Dollars, the stock trades on 24 times forward. And for the following year, earnings are expected to be around 2.5 Dollars, so the stock trades further out at 21 times. The big thing yesterday was that the dividend was hiked to 25 cents a quarter. From 20 cents, so it was not insignificant. The dividend yield is now, pre-tax 1.9 percent. We continue to accumulate one of the best brands and consumer stocks globally. This is a spectacular brand with huge growth potential.