Starbucks Opens 1,677 New Stores

Starbucks Corp. (NASDAQ: SBUX) had a strong quarter but disappointed Wall Street with its forecast. However, one measure of the coffee chain’s long-term strength is that it opened 1,677 net new stores in the fiscal year that ended September 27. That puts its global total at 23,043 in 68 countries.

Starbucks, although not similar to McDonald’s Corp. (NYSE: MCD) and Subway in most menu items, has come close to matching them in reach as measured by global store count. In 2008, Jim Donald, who founder Howard Schulz fired, predicted Starbucks eventually would have 40,000 locations. His claim was wildly optimistic. Starbucks may never reach that number, but his forecast no longer seems entirely foolish.

One measure of how Starbucks has done is its share price. Another is its remarkable growth despite its already huge size. The company’s stock has risen 304% in the past five years. Its total revenue for the fiscal year just ended was $19.2 billion, up 16.5% from a year earlier. Net income rose 33.4% to $2.8 billion.

More remarkable than the fiscal year results is that Starbucks claims it will open about 1,800 stores in the current fiscal year. Management believes it has not hit its peak store count, which some of the largest fast-food chains have, as their store additions have gone a bridge too far and their financial results show it.

Schultz does not talk about peak store count. However, he and his management must discuss the issue privately. Starbucks has expanded its menu as a means to draw more customers. It also has grown due in part to “groundbreaking technology innovation that is deepening our connection to customers everywhere.” But even technology can only carry a company so far. At some point its growing customer base becomes saturated. However, for management to acknowledge that now would be foolish.

In the meantime, Starbucks results speak for themselves. The coffee shop company has a limitless future in terms of sales and locations. Schultz does not want anyone to look beyond that horizon.

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