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Starbucks (SBUX) Inks Licensing Agreement With SouthRock

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Starbucks (SBUX - Free Report) has inked an agreement with SouthRock, a leading multi-brand restaurant operator in Brazil, to fully license Starbucks’ retail operations in the country. This move will enable SouthRock to develop and operate Starbucks stores in Brazil, thereby giving the coffee giant an opportunity to pursue its long-term growth agenda for Brazil.

The company has been serving Brazilian customers since December 2006 with a consistent and authentic in-store experience. Starbucks serves customers in 113 stores in 17 cities across the states of São Paulo and Rio de Janeiro with more than 1,450 employees.

Starbucks currently serves several Latin America and the Caribbean markets namely Argentina, Aruba and Curacao, Bahamas, Brazil, Bolivia, Chile, Colombia, Costa Rica, El Salvador, Guatemala, Jamaica, Mexico, Panama, Peru, Puerto Rico, Trinidad and Tobago. With the transition of ownership in Brazil, Starbucks’ retail operations across all the 17 markets in Latin America and the Caribbean will become wholly licensed. The company has plans to open stores in Uruguay later this year.

Global Expansion on Track

Expansion has been one of the important growth strategies for this coffee giant. Management focuses on increasing its global market share by judiciously opening stores in new and prevailing markets, remodeling existing stores, deploying technology, controlling costs, and aggressive product innovation and brand building.

In fiscal 2018, Starbucks expects to expand globally by adding 2,300 net new locations (excluding Teavana closures), marking an increase from roughly 2,250 net new locations in fiscal 2017.

Expanding beyond the United States has been one of Starbucks’ key growth strategies. Last December, Starbucks opened its 25th store in San Juan, Puerto Rico. In November 2017, the company opened its first store in Jamaica, marking the 76th market for the company. The company plans to launch 14 more stores over a period of five years. These stores will offer a range of Starbucks’ beverages and food, including its signature handcrafted hot and cold espresso beverages made with 100% arabica coffee.

Meanwhile, Starbucks’ shares have gained 8.9% in the last six months, comparing favorably with 5.3% growth of its industry. Also, the trend in earnings estimate revisions is satisfactory as it moved 5.1% up for the current year and 3.7% for fiscal 2019 over the past 60 days. This signals at analysts’ optimism surrounding this Zacks Rank #3 (Hold) stock’s performance in the near term.


Stocks to Consider

A few better-ranked stocks in the same space are Dine Brands Global, Inc. (DIN - Free Report) , BJ's Restaurants, Inc. (BJRI - Free Report) and Darden Restaurants, Inc. (DRI - Free Report) . Dine Brands sports a Zacks Rank #1 (Strong Buy), while the other two companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Dine Brands is expected to witness 22.7% earnings growth for 2018.

Earnings for BJ's Restaurants are expected to grow 27.7% in 2018.

Darden’s fiscal 2018 earnings are projected to grow 18.4%.

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