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Starbucks' (SBUX) Expansion Efforts to Drive Growth in 2022
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Shares of Starbucks Corporation (SBUX - Free Report) have gained 10.6% in the past year compared with the industry’s growth of 15%. Although the stock has underperformed the industry in 2021, it is likely to perform well in 2022. Robust expansion efforts, comps growth and digitalization bode well for the company. Let’s delve deeper.
Factors Likely to Drive Growth in 2022
Starbucks continues to focus on expansion efforts to drive growth. In fiscal 2019, Starbucks added 1,900 net new stores. In 2018 and 2017, the company had added 2,300 and 2,250 net new locations, respectively. Despite the pandemic, the company opened 130 and 260 net new stores in the third and fourth-quarter fiscal 2020, respectively. Moreover, the company inaugurated 1,400 new stores in fiscal 2020. In fiscal 2021, Starbucks opened 1,173 net new stores worldwide, bringing the total store count to 33,833. The company expects to open nearly 2,000 net new stores worldwide in fiscal 2022.
In terms of expansion in China, Starbucks opened 225 net new stores (in the fiscal fourth quarter) and 654 net new stores (in fiscal 2021), thereby bringing the total count to 5,360 stores in the region. The company plans to build 600 net new stores annually over the next five years in Mainland China, which will double its store count from the end of fiscal 2017 to 6,000 across 230 cities.
The company’s U.S. comps have impressed investors for the third straight quarter. In fourth-quarter fiscal 2021, the company’s North America segment reported comps growth of 22% year over year, owing to an 18% increase in transaction comps and a 3% rise in average ticket. U.S. comps rose 20% in the fiscal fourth quarter, owing to a material increase in transaction comps of 19%. The company now anticipates global comparable sales to reach high-single digits in fiscal 2022.
The Zacks Rank #3 (Hold) company is also focusing on digitalization. The company made progress with respect to personalized digital relationship to expand reach with members. This includes program enhancements like Stars for Everyone. Starbucks initiated payment partnerships with PayPal and Bakkt, thereby allowing customers to reload their Starbucks cards through a range of cryptocurrencies (including Bitcoin and Ethereum), coupled with the option of converting digital currencies to physical currency. Notably, the company is exploring the blockchain platform for ways to connect Starbucks Rewards program with other merchant reward programs, coupled with the motive of tokenization of stars. The initiative paves a path for the exchange of value across brands, enhanced digital services as well as swapping of other loyalty points for stars. To support this initiative, the company recently launched Canadian loyalty program with Air Canada.
Image Source: Zacks Investment Research
Key Picks
Some better-ranked stocks in the same space include Papa John's International, Inc. (PZZA - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and McDonald's Corporation (MCD - Free Report) .
Papa John's currently carries a Zacks Rank #2 (Buy). The company benefits from its off-premise business model. Sales at off-premise business model have exceeded pre-pandemic levels. We believe that a boost in customer count coupled with targeted off-premise marketing is likely to drive the channel’s performance in the upcoming periods.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Papa John's has a trailing four-quarter earnings surprise of 27.2%, on average. The company’s fiscal 2021 earnings is likely to witness growth of 142.1%. PZZA stock has gained 64.2% in the past year.
Arcos Dorados carries a Zacks Rank #2. ARCO has has a long-term earnings growth of 42.9%. Shares of the company have increased 13.1% so far this year.
The Zacks Consensus Estimate for Arcos Dorados’ current financial-year sales and EPS suggests growth of 31% and 112.5%, respectively, from the year-ago period’s levels.
McDonald’s carries a Zacks Rank #2. A robust drive-thru presence and investments in delivery and digitization in the past few years have helped the company to tide over the pandemic. The company has a trailing four-quarter earnings surprise of 6.8%, on average.
The Zacks Consensus Estimate for McDonald's current financial year sales and EPS suggests growth of 20.9% and 55.7%, respectively, from the year-ago period’s levels. MCD has rallied 28% in the past year.
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Starbucks' (SBUX) Expansion Efforts to Drive Growth in 2022
Shares of Starbucks Corporation (SBUX - Free Report) have gained 10.6% in the past year compared with the industry’s growth of 15%. Although the stock has underperformed the industry in 2021, it is likely to perform well in 2022. Robust expansion efforts, comps growth and digitalization bode well for the company. Let’s delve deeper.
Factors Likely to Drive Growth in 2022
Starbucks continues to focus on expansion efforts to drive growth. In fiscal 2019, Starbucks added 1,900 net new stores. In 2018 and 2017, the company had added 2,300 and 2,250 net new locations, respectively. Despite the pandemic, the company opened 130 and 260 net new stores in the third and fourth-quarter fiscal 2020, respectively. Moreover, the company inaugurated 1,400 new stores in fiscal 2020. In fiscal 2021, Starbucks opened 1,173 net new stores worldwide, bringing the total store count to 33,833. The company expects to open nearly 2,000 net new stores worldwide in fiscal 2022.
In terms of expansion in China, Starbucks opened 225 net new stores (in the fiscal fourth quarter) and 654 net new stores (in fiscal 2021), thereby bringing the total count to 5,360 stores in the region. The company plans to build 600 net new stores annually over the next five years in Mainland China, which will double its store count from the end of fiscal 2017 to 6,000 across 230 cities.
The company’s U.S. comps have impressed investors for the third straight quarter. In fourth-quarter fiscal 2021, the company’s North America segment reported comps growth of 22% year over year, owing to an 18% increase in transaction comps and a 3% rise in average ticket. U.S. comps rose 20% in the fiscal fourth quarter, owing to a material increase in transaction comps of 19%. The company now anticipates global comparable sales to reach high-single digits in fiscal 2022.
The Zacks Rank #3 (Hold) company is also focusing on digitalization. The company made progress with respect to personalized digital relationship to expand reach with members. This includes program enhancements like Stars for Everyone. Starbucks initiated payment partnerships with PayPal and Bakkt, thereby allowing customers to reload their Starbucks cards through a range of cryptocurrencies (including Bitcoin and Ethereum), coupled with the option of converting digital currencies to physical currency. Notably, the company is exploring the blockchain platform for ways to connect Starbucks Rewards program with other merchant reward programs, coupled with the motive of tokenization of stars. The initiative paves a path for the exchange of value across brands, enhanced digital services as well as swapping of other loyalty points for stars. To support this initiative, the company recently launched Canadian loyalty program with Air Canada.
Key Picks
Some better-ranked stocks in the same space include Papa John's International, Inc. (PZZA - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and McDonald's Corporation (MCD - Free Report) .
Papa John's currently carries a Zacks Rank #2 (Buy). The company benefits from its off-premise business model. Sales at off-premise business model have exceeded pre-pandemic levels. We believe that a boost in customer count coupled with targeted off-premise marketing is likely to drive the channel’s performance in the upcoming periods.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Papa John's has a trailing four-quarter earnings surprise of 27.2%, on average. The company’s fiscal 2021 earnings is likely to witness growth of 142.1%. PZZA stock has gained 64.2% in the past year.
Arcos Dorados carries a Zacks Rank #2. ARCO has has a long-term earnings growth of 42.9%. Shares of the company have increased 13.1% so far this year.
The Zacks Consensus Estimate for Arcos Dorados’ current financial-year sales and EPS suggests growth of 31% and 112.5%, respectively, from the year-ago period’s levels.
McDonald’s carries a Zacks Rank #2. A robust drive-thru presence and investments in delivery and digitization in the past few years have helped the company to tide over the pandemic. The company has a trailing four-quarter earnings surprise of 6.8%, on average.
The Zacks Consensus Estimate for McDonald's current financial year sales and EPS suggests growth of 20.9% and 55.7%, respectively, from the year-ago period’s levels. MCD has rallied 28% in the past year.