uploads///Starbucks Global Comps

Why Starbucks’s 3Q15 Growth Is Impressive


Jul. 24 2015, Published 12:55 p.m. ET

Starbucks’s growth

Global comps for Starbucks (SBUX) came in at 7%, which grew from 6% in the corresponding quarter a year ago in 2014. While this is impressive enough growth, we should note that 4% of this growth came from traffic. Growing traffic means more customers are visiting Starbucks year-over-year. In terms of number, the company stated 23 million more customers visited Starbucks in 3Q15.

The company has maintained 5% comps growth over the last 15 quarters. In recent quarters, the ticket has contributed more towards this growth than traffic has. But you can see that traffic began to increase in 4Q14, which is a big positive for Starbucks—particularly in 3Q15, when most of the comps growth came from traffic.

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Management’s focus

Starbucks’s management is focusing on the Americas and the company’s CAP (China/Asia Pacific) segments. The Americas segment contributes 73% to Starbucks Operating income and the CAP segment contributes about 12% towards Starbucks operating income. China is a high-growth segment for the company with huge potential.

Yum! Brands (YUM), for example, currently receives the majority of its revenue from the Chinese market, and McDonald’s (MCD) isn’t far behind.

By investing in the Consumer Discretionary Select Sector SPDR Fund (XLY), you can get exposure to SBUX, YUM, and MCD. The XLY’s portfolio includes 10% in restaurant stocks, 1% of which is invested in Chipotle Mexican Grill (CMG).

The Americas segment has the company’s largest store footprint with 14,400+, or ~65%, of the restaurants in the system. This market has fewer unit penetration opportunities than the CAP market and the Europe, Middle East, and African markets. As a result, growing comps make more sense in this region and have more impact on revenues, because they don’t require huge capital investments.

So, how did Starbucks’s different segments perform in 3Q15? Read on to the next part of this series.


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