Analyse aandeel Starbucks

Starbucks' global growth, channel expansion, and brand diversification efforts provide more potential upside catalysts than most consumer cyclical names.

R.J. Hottovy, CFA 02 juni, 2014 | 11:07

INVESTMENT THESIS

We view Starbucks as one of the most compelling growth stories in the consumer space today, well positioned for top-line growth and margin expansion through product innovations, meaningful cost advantages, and its evolution into a diversified retail and consumer packaged goods platform. Representing about one third of coffee cups sold at retail and 4% of the 90 billion coffee cups brewed at home in the United States, Starbucks still has meaningful domestic growth potential, including new beverage innovations and a revamped food platform, expanded peak hour capacity, and My Starbucks Rewards usage. At a time when most restaurant and retailers are struggling to stimulate transaction growth, Starbucks' recent transaction gains are impressive and underpin the global strength of its brand. We believe operational best practices from Starbucks' U.S. stores can be applied to retail locations in Europe and Asia, driving future unit-level productivity improvements.

Starbucks is much more than retail story, and we believe the company is just starting to scratch the surface of its longer-term channel development, brand diversification, and geographic expansion opportunities. We believe many of the competitive advantages of Starbucks' core retail operations will extend into these diversification efforts, putting the company in a unique position to capture retail and wholesale market share over a long horizon. Platforms like VIA single-serve coffee, K-Cups, Verismo, and Seattle's Best Coffee should support channel diversification efforts over the near term, with nascent brands like Evolution Fresh, La Boulange, and Teavana becoming important cash flow contributors over a longer horizon. We're also optimistic about potential mobile, digital, and loyalty program synergies across the different business lines. Starbucks' international growth potential is undeniable, particularly in emerging markets like China, India, and Brazil. Formidable threats exist in both the retail and wholesale channels, but we believe a wide moat founded on strong brand equity, bargaining clout with its suppliers, and a highly leverageable model will be enough to stave off rivals.


VALUATION

Economic Moat      Fair value   Stewardship Rating   Starbucks
Wide    USD 80.00     Exemplary  
Moat Trend   Uncertainty   Sector  
Stable   Medium  

Cycl. consumptiegoed - 
restaurants                

 

BULLS

  • Starbucks is well positioned to adapt to evolving consumer shopping preferences, thanks to a brand that transcends channels; investments in digital, social media, mobile payment, and loyalty program assets; and an unparalleled in-store experience.

  • A reinvigorated food menu, La Boulange products, and store redesigns have improved the Starbucks customer experience, penetrated new dayparts, and boosted unit-level productivity.

  • Despite its growth plans, we believe Starbucks can sustain a 40%-45% dividend payout ratio, implying at least midteens dividend growth over the next decade.

 

 

BEARS

  • Because switching costs are minimal, there is little to prevent customers from trading to other specialty coffee chains including Dunkin' Brands, Tim Hortons, or McDonald's. Joh. A. Benckiser Group's consolidation of Mondelez's coffee assets, D.E Master Blenders, Peet's, and Caribou Coffee could evolve into a formidable rival.

  • Nascent brands such as Evolution Fresh, La Boulange, and Teavana could take attention from the core Starbucks brand and add execution risk to management's already loaded agenda.

  • Volatile labor costs and commodity prices could weigh on quarter-to-quarter results.

 

 

 

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Effecten genoemd in dit artikel
Naam effectPrijsChange (%)Morningstar Rating
Starbucks Corp73,98 USD-0,84
Over de auteur

R.J. Hottovy, CFA  R. J. Hottovy, CFA, is a director of equity analysis with Morningstar.