All Hail Starbucks!

I have to confess that I’m not a consumer of Starbucks ($SBUX) — I’m just not a coffee drinker — but I’m a fan of the company. As a business, Starbucks has done incredibly well.

I often tell investors that doing a business turnaround is far harder than it looks, and Starbucks pulled one off. The shares fell from $40 down to $7.

The stock is now at $88 and on Thursday, Starbucks reported another good quarter:

Sales in the quarter, which ended Dec. 28 and was its first quarter for the 2015 fiscal year, rose 13 percent to $4.8 billion, while earnings rose to $983.1 million, from $540.7 million in the same quarter a year earlier, thanks to the Starbucks Japan purchase.

Adjusted for that acquisition, earnings on each share of stock were 80 cents, a 16 percent increase over the same quarter last year. The figures for revenue and earnings per share were records for Starbucks.

The company also announced that Kevin Johnson, the retired chief executive of Juniper Networks and a member of the Starbucks board, would become its new president and chief operating officer. Mr. Johnson replaces Troy Alstead, who starting in March will take a yearlong sabbatical from the company, as previously announced.

Investment analysts were closely watching comparable-store sales performance, after five quarters of relatively lackluster traffic. The company used a mix of new products and promotions, including an increased selection of gift cards and a new latte, Chestnut Praline, to attract consumers during the critical holiday season.

The company has an ambitious goal to nearly double sales and operating income over the next five years, and to that end, has begun acting on several strategies to make its stores more productive in the afternoons and evenings and increase their convenience to consumers.

Last fall, it announced it would begin wine and beer sales, previously tested in the Chicago area, in about a quarter of its 12,000 stores, and more of the food being made through its purchase of La Boulange in 2012 is geared toward light lunch and dinner meals.

Starbucks earns about 16 percent of its revenue from its mobile payment system, which is regarded as a model by others in the food industry, and it has been testing a new mobile ordering and payment system that it hopes will lift sales and shorten the time customers spend waiting in line.

It also is working on a delivery service.

Posted by Eddy Elfenbein on January 26th, 2015 at 12:45 pm

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