Starbucks isn't counting on the stores themselves to be game changers (or, for that matter, on converting people who happily pay $4 for coffee to start paying $8). There's currently only one in operation, but Starbucks expects to have more than 1,000 locations around the globe, and it will also look to incorporate mini-versions of the Reserve store in 20% of its regular locations. Starting this year, Schultz plans to build up Starbucks' specialty Roastery and Reserve stores-higher-end locations catering to the coffee epicure with premium cups of Joe. But as one analyst notes, "most other restaurant chains would kill" for growth like that. That could take place within the next five years.Ĭomps rose only 3% in the last quarter. Mark Kalinowski, an analyst at brokerage Nomura Instinet, believes Starbucks will also surpass the Golden Arches in market capitalization, making it the largest restaurant chain in the world by that measure. By 2021 it plans to have 37,000 stores, more than McDonald's currently has.
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In China, Starbucks is opening a new store every 15 hours, making the country its biggest driver of growth. It opened 884 stores over the past year in the U.S., where it now boasts more than 16,000 locations. Starbucks portrays these issues as minor stumbles on a rising path. But the switch didn't go as smoothly as planned: Although there are now 12.9 million members signed up, the rewards program grew more slowly than Starbucks had expected for most of the past year.
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The company switched to offering free food and drink awards based on how much a customer spends rather than on the number of visits to a cafe?, in hopes of speeding up service. Starbucks also suffered a hiccup in its rewards program. The rollout of food service, which now accounts for about 20% of sales, is mostly complete, so growth from that category is no longer outpacing the market. Some longer-term changes within the company contributed to Starbucks' slowdown. After the earnings announcement, investors fled, knocking another 7% off the share price. In the year-earlier quarter, for example, Starbucks comps were up 9%. But by Starbucks standards, it represented a plummeting disappointment. "Most other restaurant chains would kill" for Starbucks' results, says AB Bernstein equity analyst Sara Senatore. Considering that "comps" for the restaurant industry as a whole were down 2.4% for that quarter, according to researcher TDn2K, that performance was remarkable. comparable-store sales, a metric that measures performance at Starbucks-owned locations open more than a year, were up 3% year over year. Starbucks' results from its most recent quarter, which ended Jan. For a company as big as Starbucks has become, with about $21 billion in annual revenue and almost 26,000 stores in 75 countries, it's simply hard to keep growing at a pace that wows investors. Look past those short-term challenges, and you could confront an even more sobering reality: the law of large numbers. A skeptic could point to slowing sales growth, uncertainty about leadership after Schultz's announcement of his (second) retirement as CEO, or even the Seattle-based company's plan to rely on overseas growth at the dawn of an era of Trump-driven uncertainty for multinational businesses. Distressingly enough, there was no single reason for the decline.
After rising an absurd 1,170% from 2009 through 2015, shares fell 8% in 2016, their first down year since 2008-even as the overall market jumped 10%. And the past several months have generated plot twists that, from a shareholder's perspective, have changed the genre of the Starbucks story from romance to suspense.Įven as Schultz spoke, Starbucks' stock was stumbling. But as any avid reader knows, Chapter 4 or 5 is where the complications and drama typically kick into high gear. Schultz intended the metaphor to symbolize the bright future awaiting the company, which turns 46 in March. He described the coffee-shop giant's life span as a 20-chapter book and added, "I still think we're in Chapter 4 or 5." Late last year CEO Howard Schultz opened the company's annual investor day with a characteristically bold and quirky proclamation.
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