Starbucks Continues to Percolate
Since reporting its June quarter results, the shares of Starbucks (SBUX), the world's largest coffee-shop chain, have dropped significantly to a low near $43 before rebounding in the last few days to the current $46.43. Even so, SBUX shares are well off their 52-week high of $62 per share. Concerns about slowing consumer spending coupled with management trimming its near-term outlook were the drivers behind the shares falling back to their early January levels. As background, the company reduced its current quarter forecast by roughly 4% to $0.44-$0.45 per share from $0.47. Despite that modest revision, Starbucks is still on track to deliver 22% year-over-year earnings growth.
It seems to me the drop in SBUX shares over the last month is overdone, particularly when we assemble the pieces of the company's strategy, which includes expanding its product offering as well as growing its global footprint. In terms of expanding its product offerings, Starbucks has been on a tear over the last few years -- not only in terms of seasonal coffee based drinks that carry favorable margins, but also in terms of teas, hot sandwiches, bistro boxes and pastries. Those efforts have grown the food business to the point that roughly one-third of all of the company's transactions now have a food attachment....515 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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