Sales growth has accelerated at Starbucks, John Jannarone writes, and there's reason to believe that it will continue even as it has scaled back on the rapid outlet expansion of the late Nineties and
early Aughts. McDonald's coffee initiatives may have less of an impact on Starbucks' sales than some analysts predicted because customers would have to go out of their way to switch allegiances. Only
23% of U.S. Starbucks locations have a McDonald's within a quarter-mile, according to Morgan Stanley's John Glass.
Spending on marketing is up, too, which has probably contributed to
the company's consumer-products business perking up. Credit Suisse's Keith Siegner also credits a recent move to sell packaged coffee at more competitive prices. Consumer products account for less
than 10% of Starbucks revenue but around 20% of its operating profit.
The company is also poised to reap profits from company-operated stores in markets such as China, which usually
take several years of heavy investment before stores they show a profit.
advertisement
advertisement
Read the whole story at Wall Street Journal »