Starbucks Corp. (MM) (NASDAQ:SBUX)
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5 Years : From May 2012 to May 2017
As Starbucks Corp. (SBUX) gradually diverges from coffee-brewing basics, investors prepare for an annual meeting Wednesday that will focus on international expansion, consumer products and other endeavors that broaden the chain's horizons from its traditional U.S. cafes.
In the past year, Starbucks has joined forces with Green Mountain Coffee Roasters Inc. (GMCR) to make Starbucks-branded single-serve coffee packs; highlighted its China market by reporting results separately for China and Asia Pacific outside the rest of its international markets; formed a joint venture to open Starbucks cafes in India; created a single-serve coffee and espresso brewer; acquired a juice company; added beer and wine to the menus in more cafes; and began selling a light roast for the first time. And that's just to name a half dozen or so.
"There has really been an endless stream of products, so investors are betting on Starbucks' ability to innovate and execute on those innovations," said Sanford C. Bernstein & Co. restaurant analyst Sara Senatore, citing its success of K-cup coffee pods for Green Mountain's Keurig Machines. "So far, Starbucks has done a fantastic job."
Starbucks regained its footing a couple years ago after a restructuring that resulted in the closure of nearly 1,000 cafes around the world. In fiscal 2011, which ended Oct. 2, Starbucks generated a profit of $1.25 billion, which is 31.7% more than in 2010. Starbucks' share price rose about 43% to $35.93 in fiscal 2011, and since then, it has climbed another 45%, recently trading at $53.66.
Starbucks also changed its logo last year, dropping the Starbucks name, reflecting its confidence in the global brand power represented by the iconic siren featured in the center of its emblem.
This year's so-called Blueprint For Growth at Starbucks' shareholder meeting will have a lot to work from worldwide but, even still, the U.S. remains the company's biggest contributer to profits. The Americas region generated about 75% of the companies total revenue in the most recent quarter.
"Even though the change is really coming from the consumer packaged goods and other geographies, I don't want to understate the U.S. business," Senatore added.
Starbucks' U.S. business is still growing, both in terms of opening new cafes and bringing in more sales at existing ones. Even in the tough economy and heavily saturated market, Starbucks has been able to keep customers from downgrading to a lower-priced coffee from the likes of McDonald's Corp. (MCD) or Dunkin' Brands (DNKN).
This year, the chain faces headwinds of higher commodity costs, which are expected to add about $230 million of cost pressures in fiscal 2012. But Starbucks says it will still improve its profit margin this year through continued sales growth and savings elsewhere.
Investors tuning in to the 10 a.m. PDT meeting in Starbucks' hometown of Seattle are also awaiting more information about its business partnership with Green Mountain. On March 8, Starbucks' announced its intent to sell its own single-serve coffee machine, and Green Mountain's shares began tumbling. But earlier Wednesday, Starbucks said it will continue working with Green Mountain, coming out with new single-serve pouches for Green Mountain's latest brewer, the Vue.
-By Annie Gasparro, Dow Jones Newswires; 212-416-2244; email@example.com