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Here's Why Investors Should Retain Starbucks (SBUX) Stock
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Starbucks Corporation (SBUX - Free Report) is gaining from a robust rebound in China, notable advancements in its Reinvention Plan, expansion efforts and successful launches of innovative beverages. As a result, the stock has appreciated by 18.1% over the last year, outperforming the industry's 10.4% growth. Nonetheless, rising expenses and inflationary pressures remain significant areas of worry.
The Zacks Rank #3 (Hold) company’s earnings and sales in fiscal 2023 are likely to witness growth of 16.6% and 11.1% year over year, respectively. The company also has an impressive long-term earnings growth rate of 16.5%. Let’s delve deeper.
Growth Drivers
After a downturn in business due to COVID-19, China bounced back faster than expected and has been contributing majorly to consolidated revenues since the past four quarters. SBUX is thus quite confident about long-term growth opportunities. Improving customer experience with innovative new store designs and upgraded product offerings, and supply-chain efficiencies bode well. It intends to continue expanding its presence with nearly 13% store growth in 2023.
The company is also benefiting from robust expansion efforts. In fiscal 2017, 2018, 2019, 2020, 2021 and 2022, it added 2,250, 2,300, 1,900, 1,400, 1,173 and 1,120 net new stores, respectively. In the first, second and third-quarter fiscal 2023, Starbucks opened 459, 464 and 588 net new stores worldwide, respectively.
During fiscal 2023, the company expects store count in the United States and China to grow approximately 3% and 13%, respectively, on a year-over-year basis. Management projects global store growth to be nearly 7%. Capital expenditures in fiscal 2023 are estimated to be approximately $2.5 billion.
Starbucks is strengthening its product portfolio with significant innovation around beverages, refreshment, health and wellness, tea and core food offerings. It is leaning toward fast-growing categories like Cold Brew, Draft Nitro beverages, and plant-based modifiers including almond, coconut and soy milk alternatives.
SBUX’s North America comps impressed investors for the tenth straight quarter. The segment benefited from growth in company-operated comparable store sales of 7%, net new company-operated store growth of 4% and strong licensed store sales. Segmental average ticket and transaction tose 6% and 1%, respectively, on a year-over-year basis. For fourth-quarter fiscal 2023, our model predicts company-operated store sales in North America to improve 9.6% to $6,085.1 million year over year.
Image Source: Zacks Investment Research
Concerns
Ongoing inflationary pressure is likely to hurt the company’s performance. Its ingredients are witnessing a jump in price since the last few quarters. Higher expenses may weigh on margins in the near term. During third-quarter fiscal 2023, total operating expenses climbed 10.8% year over year.
Moreover, dismal Channel Development sales remain a concern. During third-quarter fiscal 2023, net revenues in the segment declined 6.4% year over year to $448.8 million. The downside was primarily stemmed from a fall in its Global Coffee Alliance business.
Key Picks
Below we present some better-ranked stocks in the Zacks Retail-Wholesale sector.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 423.5% growth, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) currently carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth rate of 9.5%. The stock has gained 35.6% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests rises of 19% and 11.6%, respectively, from the year-ago period’s levels.
Chuy's Holdings, Inc. (CHUY - Free Report) holds a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 26.6%, on average. Shares of CHUY have surged 72.9% in the past year.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS implies increases of 9.5% and 32.9%, respectively, from the year-ago period’s levels.
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Here's Why Investors Should Retain Starbucks (SBUX) Stock
Starbucks Corporation (SBUX - Free Report) is gaining from a robust rebound in China, notable advancements in its Reinvention Plan, expansion efforts and successful launches of innovative beverages. As a result, the stock has appreciated by 18.1% over the last year, outperforming the industry's 10.4% growth. Nonetheless, rising expenses and inflationary pressures remain significant areas of worry.
The Zacks Rank #3 (Hold) company’s earnings and sales in fiscal 2023 are likely to witness growth of 16.6% and 11.1% year over year, respectively. The company also has an impressive long-term earnings growth rate of 16.5%.
Let’s delve deeper.
Growth Drivers
After a downturn in business due to COVID-19, China bounced back faster than expected and has been contributing majorly to consolidated revenues since the past four quarters. SBUX is thus quite confident about long-term growth opportunities. Improving customer experience with innovative new store designs and upgraded product offerings, and supply-chain efficiencies bode well. It intends to continue expanding its presence with nearly 13% store growth in 2023.
The company is also benefiting from robust expansion efforts. In fiscal 2017, 2018, 2019, 2020, 2021 and 2022, it added 2,250, 2,300, 1,900, 1,400, 1,173 and 1,120 net new stores, respectively. In the first, second and third-quarter fiscal 2023, Starbucks opened 459, 464 and 588 net new stores worldwide, respectively.
During fiscal 2023, the company expects store count in the United States and China to grow approximately 3% and 13%, respectively, on a year-over-year basis. Management projects global store growth to be nearly 7%. Capital expenditures in fiscal 2023 are estimated to be approximately $2.5 billion.
Starbucks is strengthening its product portfolio with significant innovation around beverages, refreshment, health and wellness, tea and core food offerings. It is leaning toward fast-growing categories like Cold Brew, Draft Nitro beverages, and plant-based modifiers including almond, coconut and soy milk alternatives.
SBUX’s North America comps impressed investors for the tenth straight quarter. The segment benefited from growth in company-operated comparable store sales of 7%, net new company-operated store growth of 4% and strong licensed store sales. Segmental average ticket and transaction tose 6% and 1%, respectively, on a year-over-year basis. For fourth-quarter fiscal 2023, our model predicts company-operated store sales in North America to improve 9.6% to $6,085.1 million year over year.
Image Source: Zacks Investment Research
Concerns
Ongoing inflationary pressure is likely to hurt the company’s performance. Its ingredients are witnessing a jump in price since the last few quarters. Higher expenses may weigh on margins in the near term. During third-quarter fiscal 2023, total operating expenses climbed 10.8% year over year.
Moreover, dismal Channel Development sales remain a concern. During third-quarter fiscal 2023, net revenues in the segment declined 6.4% year over year to $448.8 million. The downside was primarily stemmed from a fall in its Global Coffee Alliance business.
Key Picks
Below we present some better-ranked stocks in the Zacks Retail-Wholesale sector.
BJ's Restaurants, Inc. (BJRI - Free Report) sports a Zacks Rank #1 (Strong Buy). It has a trailing four-quarter earnings surprise of 121.2%, on average. Shares of BJRI have increased 16.1% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for BJRI’s 2023 sales and EPS indicates 5.6% and 423.5% growth, respectively, from the year-ago period’s levels.
Arcos Dorados Holdings Inc. (ARCO - Free Report) currently carries a Zacks Rank #2 (Buy). ARCO has a long-term earnings growth rate of 9.5%. The stock has gained 35.6% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2023 sales and EPS suggests rises of 19% and 11.6%, respectively, from the year-ago period’s levels.
Chuy's Holdings, Inc. (CHUY - Free Report) holds a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 26.6%, on average. Shares of CHUY have surged 72.9% in the past year.
The Zacks Consensus Estimate for CHUY’s 2023 sales and EPS implies increases of 9.5% and 32.9%, respectively, from the year-ago period’s levels.