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Starbucks’s 3Q17: What to Expect from the Unicorn Frap Giant

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Part 2
Starbucks’s 3Q17: What to Expect from the Unicorn Frap Giant PART 2 OF 6

What Analysts Expect for Starbucks’s Fiscal 3Q17 Revenue

Revenue sources

In fiscal 3Q17, analysts expect Starbucks (SBUX) to post revenue of $5.75 billion, which represents growth of 9.9% from $5.23 billion in fiscal 3Q16. Revenue growth is expected to be driven by positive same-store sales growth (or SSSG), the addition of new restaurants, and growth in CPG (consumer packaged goods) sales.

What Analysts Expect for Starbucks&#8217;s Fiscal 3Q17 Revenue

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Revenue growth

Compared to fiscal 3Q16, Starbucks operated 1,766 more restaurants, which include 921 company-owned restaurants, by the end of 2Q17. These restaurants, along with restaurants opened in fiscal 3Q17, are expected to drive Starbucks’s fiscal 3Q17 revenue.

Despite soft SSSG in the first two quarters of fiscal 2017, the company’s management still expects its fiscal 2017 SSSG to be in the mid single digits. SSSG is expected to be driven by food and beverage innovation, the implementation of technological advancements, and growth in Starbucks Rewards members.

In April 2017, the company launched a new fresh food concept, Mercato, in Chicago. After receiving a positive response from customers, the company plans to expand this food concept to other restaurants. During this quarter, Starbucks also introduced the Midnight Mint Mocha Frappuccino, Emerald City Mule, Unicorn Frappuccino, and Cascara Lemon Sour.

Starbucks introduced a new digital order manager or DOM and selective labor allocation to reduce congestion and handle traffic efficiently at peak periods. All these initiatives, along with growth in Starbucks reward members, are expected to drive Starbucks’s SSSG in fiscal 3Q17.

In February 2017, Starbucks started shipping Teavana ready-to-drink teas in partnership with Anheuser-Busch InBev (BUD). The growth in Starbucks’s core Doubleshot and Frappuccino beverages, and the expansion of distribution of Starbucks Nespresso-compatible capsules in the United Kingdom and France are expected to drive Starbucks’s revenue from the CPG segment.

Peer comparisons

During the same period, analysts expect Dunkin’ Brands (DNKN) and Domino’s Pizza (DPZ) to post revenue growth of 2.2% and 12.0%, respectively. However, McDonald’s (MCD) revenue is expected to fall 4.9%.

Outlook

For the next four quarters, analysts expect Starbucks to post revenue of $23.80 billion, which represents growth of 8.3% from $21.97 billion in the corresponding quarters of the previous year.

Next, we’ll look at Starbucks’s margins in fiscal 3Q17.

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