Starbucks (SBUX ) reports earnings this Thursday, May 3rd after the market close. Get ready to read about 5,000 articles this week about "how will Starbucks report? " and if the company doesn’t report something impressive, you can bet we’ll see a drop in the share price.
The guys from 247WallSt. have been touring the country’s Starbucks and providing some insight about what they are seeing at just a few of the thousands of coffee houses they own. Now that Starbucks has grown to become one of the largest corporations on the planet, how can you bank on their share price to continue to increase?
We’ve seen this happen before, once a company is so huge (i.e. Wal-Mart (WMT)) it starts to trade flat because, what else could they possibly do next? I live in Seattle, the birthplace of Starbucks, and believe me, you can throw a rock from one Starbucks to the next, they are everywhere. Todd Sullivan has told us over and over again that McDonalds (MCD) and everyone else is and has been taking away Starbucks’s market share one Latte at a time. For Starbucks’ shares to keep climbing, they are going to need an impressive guidance this Thursday. So what I really care about on Thursday is how is their international operations doing and how fast can they turn the East’s tea drinkers, into double-tall, no-foam, 4 Splenda, vanilla mocha lovers?
Starbucks is planning to have its first stores in Russia and India before 2008, putting the company in 41 countries. Two weeks ago SBUX announced it will open its first store in Bucharest, Romania – one of 2,400 locations planned for this fiscal year, a pace of seven new stores each day. That’s great, but if people world-wide don’t make the "same store sales" numbers increase, where does that leave Starbuck’s shareholders?
They have nearly 3000 coffeehouses in 37 countries and last year their international division brought home profits of $108 million. That number has got to increase steady going forward under the increased competition otherwise shares of SBUX will just stay put.
Starbucks is one of those stocks that everyone seems to own, even my Mom owns shares, who’s Mom doesn’t own shares? That’s great if every other American has shares of SBUX in their 401(k)’s, the company isn’t going anywhere, but if the growth doesn’t impress Wall Street, what’s the point of owning them?
Frank Lara Jr.
Frank Lara Jr. can be reached at [email protected]; he does not own securities in the companies he covers.
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