Market Overview

Starbucks' Q2 Results Are 'Emblematic' of the Company's Success

After the market close this afternoon, Starbucks (NASDAQ: SBUX) Chairman and CEO Howard Schultz told CNBC that he felt that the firm's second-quarter results were "emblematic of the success we are enjoying domestically and around the world."

The highlight of the second quarter, he said, was the comparable store sales growth of seven percent in the U.S. and six percent globally.

"I think if you look at others that are reporting, you're looking at zero to two percent," Schultz told the network, adding that he is particularly impressed with the firm's continued success throughout Asia. "And specifically China."

With regard to his competitors, Schultz said that the competition is "quite bifurcated compared to what others are doing."

He rattled off three names -- Panera (NASDAQ: PNRA), McDonald's (NYSE: MCD) and Dunkin' Brands (NASDAQ: DNKN).

"They don't resonate with the consumer" compared to what Starbucks does, which is the "sourcing and roasting of quality coffee," Schultz remarked. He also noted that there are nearly 19,000 Starbucks stores and that the experience of visiting a Starbucks outlet is wholly unique. The company will open its 1,000th store in China later this year.

Despite the impressive increase, Schultz said that Starbucks is in the "early days" of its growth and development.

Starbucks processes nearly four million mobile transactions per week. The company is attempting to create new channels of distribution outside the stores, including but not limited to its K-Cups initiative.

Looking ahead, Starbucks has three bullet points that it intends to focus on:

  • 1) Continue with the expansion of its global footprint with new stores.
  • 2) Explore all opportunities around creating new channels, such as the acquisition of Teavana.
  • 3) Use its position as the leading consumer brand in the world to lower its cost of customer acquisition and do things to create incremental growth.

Next month Starbucks will lower the price of bags of coffee in grocery stores. While this may appear to be a response to low sales, Schultz told CNBC that it was actually implemented after the price of coffee dropped internally. Now it is ready to pass that savings onto the consumer.

Schultz also believes that the lower price will help Starbucks maintain its position as the leading premium coffee brand in grocery stores.

In addition to the impressive comparable store sales growth, Starbucks reported record revenues of $3.6 billion.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

Posted-In: Howard Schultz StarbucksNews Management Success Stories Best of Benzinga

 

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