On May 4th, Starbucks 2nd quarter profits rose 18%, and same-store sales rose a niche 4% over the same period from last year. Starbucks continues to churn profits, and looks like a good long-term play because of its robust international growth initiatives.
International revenue grew 30% to $387 million from last quarter, but what’s most impressive is the announcement of Starbucks Coffee stores future openings in Russia and India by the end of 2007. Last fiscal quarter, Starbucks (SBUX) open stores in Brazil, Egypt, and Romania to add more density to their international revenue pool.
Long on SBUX
I was going to buy SBUX back in late November 2006, but the bulls got hold of the stock before I had a chance. Now, shares are hovering near the 52-week low of $28.72.
Looking at the balance sheet, SBUX long-term debt is well-under control, and the company has a wide-moat. I would compare the Starbucks name to companies like Google, Wal-mart, and McDonalds, all forerunners in each of their industries.
When you think of coffee, which corporation comes to mind?
Analysts project earnings to grow at 21% annually. Do you think Starbucks can maintain this type of growth? Keep in mind that Starbucks has yet to fully monetize the rest of the non-western world.
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Here’s an intersting tidbit about Starbucks in Ethiopia (or lack there of):
FYI, ferenj is what Ethiopians call white foreigners. It’s from this travel journal (but I copied everything about Starbucks):
http://leaveittoavery.wordpress.com/2007/01/17/monday-day-3/
If they enter the huge Indian market, I dont know if it will be as popular as it is in the US, dont they drink a lot of tea in India, or is that in China?
I agree, coffee is not very popular in India and I’m surprised they are expanding their business there. Who knows, maybe they start making tea…
@ Biotech Stock Investing
A lot of non-western cultures shy away from incessant coffee drinking. Africans are natural tea drinkers, however, the economic system are changing rapidly throughout East Africa. As the country increases its GDP, coffee drinking will become more affordable. But I wasn’t aware of the white Ethopians, that’s an interesting dynamic to consider.
@ Technified
China is well known for its tea drinking. But recently more affluent Chinese residents have adopted coffee, the drink of the wealthy in China. India will most likely follow suit. Personally, I prefer tea over coffee. I think coffee drinkers are more like drug addicts, rather than coffee fanatics. Maybe that claim is too judgemental, but that’s what blogging is for!
@ Agloco Kassper
StarBucks has saturated their domestic markets, so International growth is necessary for revenue growth. India and China make up half the world’s population. If Starbucks can capitalize on these markets, profits will soar through the roof, assuming the competition doesn’t heat up (but it will :))
Sorry, I should have added more color to that comment. Having been to Ethiopia, I can tell you that Ethiopians are huge coffee drinkers. It is totally integrated into their culture; there are ceremonies surrounded around the roasting and brewing of the coffee. It’s rude to leave someones house without drinking at least 2 cups of coffee (they’re a little bigger than size of a shot glass, and almost as strong as an espresso).
Not “white Ethiopians”, white foreigners. The point of the snipit was that only the forefingers were interested in drinking coffee at an upscale Starbucks like coffee place. Ethiopians would rather drink it in their house or at neighborhood cafes.
-Brian
Wow. I had no idea that coffee was an integral component of Ethiopian culture. Since I’ve only been to parts of Western Africa, I made an inappropriate presumption on Ethiopia without ever visiting there. Thanks for clearing that up.
I thought you meant white Ethiopians because I know many foreigners reside in Ethiopia, rear children, and live within the society just like original descendants. What type of impact have the foreigners placed on Ethiopian society? Are these tourists or residents of Ethiopia? Because these foreigners are why StarBucks wishes to control the coffee trademark rights.
See: http://www.spiegel.de/international/0,1518,448191,00.html
I think they’re mostly tourist or business people living there for a short amount of time. Addis Ababa isn’t the kind of city where most Westerners would want to settle down permanently.
Yes, it’s rather sad that Starbucks is fighting them on the trademarking issue.
-Brian