Starbucks Corporation (SBUX): Global Expansion and Product Launches to Drive This Restaurant’s Growth

Peer Analysis:

Dunkin Brands Group Inc (NASDAQ:DNKN) is primarily known for breakfast coffee with doughnuts. The company is mainly concentrated in the Northeast with plans to open new stores across the US. The comparable same-store sales growth for the company is around 5%. Dunkin is planning to open 700 to 800 new stores in FY 2013, which would be a 4% increase. The company right now is more focused on the US. It is also trying to expand its offerings. It is selling K-cups to capture the home market. The company is trying to increase its ROIC, which is currently 4.9% as compared to Starbucks’ 25.8%.

Krispy Kreme Doughnuts (NYSE:KKD) is another major player in the beverages segment. The first-quarter FY 2013 result beat Street estimates both on revenue and profit fronts. According to the management, this has been achieved mainly due to an increase in same-store traffic and partially (about 3%) due to the pricing effect. Following this performance, the management has upgraded the initial guidance for earnings for FY 2013 from a range of $0.53 to $0.57 to $0.59 to $0.63. The company has experienced growth in same-store sales continuously for the past 18 quarters.

Bottom line

Starbucks has been trading at a discount compared to its peer Dunkin Brands Group Inc (NASDAQ:DNKN). I think Starbucks is a good buy given its consistent performance and well directed diversification and expansion plans. The company has been able to rapidly expand in new markets, which has contributed handsomely to both the top line and bottom line.

The company has also successfully launched new products, which has added double-digit growth to revenue. It is also diversifying its offerings, which can be seen by the acquisition of Teavana and La Boulanage. These additions will help it to generate higher revenue. With this aggressive expansion strategy, the company is well placed to outperform both the broader markets (S&P 500) and its competitors. So I recommend a ‘buy’ for this stock.

The article Global Expansion and Product Launches to Drive This Restaurant’s Growth originally appeared on Fool.com and is written Gayatri Sharma.

Gayatri Sharma has no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Gayatri is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.