A snapshot of the quarterly earnings report
In the third quarter of fiscal year 2013, Starbucks Corporation (NASDAQ:SBUX) reported revenue of $3.74 billion, up from the $3.3 billion reported last year. Net income increased by 25.4% to $417.8 million from $333 million reported for the same quarter last fiscal year. EPS increased from $0.43 to $0.55, beating analyst’s expectations of $0.53. This was the second highest EPS reported in the company’s history.
Global same-store sales rose 8%, with North America and Asia experiencing an impressive 9% growth. Comparable-store sales in Europe, the Middle East and Africa lagged behind with 2% growth.
Another strong performer was the company’s “channel development” business, which sells coffee, tea and other products in grocery stores, on airlines and elsewhere. Its operating income grew 14% to $96.3 million.
Once a coffee shop, now a cafe!
It appears fancy coffee isn’t the only thing creating long lines at Starbucks Corporation (NASDAQ:SBUX). The company had witnessed tremendous opportunities in food and its food offerings are adding to its excellent growth numbers. Food contributed around 22% of Starbucks Corporation (NASDAQ:SBUX)’s same-store sales growth in the U.S. for this third quarter.
“Starbucks is selling more food with its new menu, and Americans are lured by its digital capabilities – like paying with their mobile phones. These are the really early days for us because, as you can imagine, we’re having to learn the way to operate food within our store environment, and obviously it’s going to complement the coffee, but we want to make sure we do not slow down the speed of service,” CEO Howard Schultz was quoted as saying.
Starbucks Corporation (NASDAQ:SBUX) has been growing through strategic alliances. One successful example is its alliance with Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR). The maker of Keurig K-Cup coffee machines has an agreement with Starbucks to package and distribute the hot beverages in a K-Cup format. Starbucks has been selling the brewing machines in its stores.
Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) recently announced excellent second quarter results. The company reported earnings of $1 billion and a 13.5% increase in its revenue as compared to the same quarter last year. Green Mountain Coffee Roasters Inc. (NASDAQ:GMCR) has increased its earnings projection for this full fiscal year and has also announced plans of adding big brands to its K-cup packs.
Starbucks Corporation (NASDAQ:SBUX) has been working on re-inventing its menu and has introduced new items like zesty chicken and black bean salad bowls. The company has also announced its plans to enter into an agreement with Paris-based global dairy giant Danone to develop a line of Greek yogurt products which will be sold in the Starbucks stores. The product line, which will be sold under the brand name “Evolution Fresh, inspired by Dannon” will be ready-to-eat parfait Greek yogurt products.
Starbucks acquired Evolution Fresh, which produces a line of cold pressed juices, in 2011 and has been working steadily to roll out the juice. It has also expanded into the tea business via its purchase of Teavana and into the fine pastry business with its purchase of La Boulange.
Starbucks foray into the $6 billion yogurt business and its continuous expansion in the food industry has been providing excellent growth opportunities and is one of the major reasons to have helped the company deliver excellent quarterly earnings.
Valuation and peer analysis
With a total market cap of $54.5 billion, Starbucks Corporation (NASDAQ:SBUX) is currently trading at $73.36. The shares have appreciated gradually since 2009 from $8.40 per share to its current price and have almost doubled over the last 12 months. With a quarterly revenue growth as high as 13%, it currently has a dividend yield of 1.2%. While Starbucks has delivered an impressive quarterly result and the shares have been performing well, the same cannot be said about Panera Bread Co (NASDAQ:PNRA).
Shares of Panera Bread Co (NASDAQ:PNRA) had appreciated to $190 per share from $160 per share in just a few months. However, the share price crashed by around 7% on the day the company released its second quarter results. The company saw a 2% decline in its revenue as compared to its first quarter. It reported slower than expected revenue growth and lower comparable store sales. A gradual decline in its breakfast items was one of the reasons for the decline in revenue.
Panera Bread Co (NASDAQ:PNRA) has a gross margin and operating margin (ttm) of 36% and 13%, respectively, as compared to Starbucks 57% and 14% and doesn’t pay dividends to its shareholders. On the positive side, the bakery chain opened 35 new stores in the second quarter and the company has plans of opening 50-60 stores by the end of this fiscal year.
Last word
Starbucks Corporation (NASDAQ:SBUX) growth story continues. An excellent third quarter earnings performance, excellent strategic alliances, growing brands and profitable business expansion plans makes it an excellent stock to buy. Add this stock to your portfolio and enjoy the company’s success.
The article Starbucks: Brewing Up Strong Earnings originally appeared on Fool.com and is written by aastha jhunjhunwala.
aastha jhunjhunwala has no position in any stocks mentioned. The Motley Fool recommends Green Mountain Coffee Roasters, Panera Bread, and Starbucks. The Motley Fool owns shares of Panera Bread and Starbucks. aastha is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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