Starbucks Might Not Be Able To Maintain Its Past Growth Rates Indefinitely. Here’s Why

…Only a few companies can brag the iconic status that Starbucks has achieved. The coffee giant transformed the coffeehouse industry in the US, extended its reach across the globe and built its presence almost pervasive nationally yet, as investors prepare for Starbucks’ first-quarter results coming this January 26, some fret that the company might begin to have troubles maintaining its past growth rates indefinitely.

Written by Reese Hall

Previous Performance

The stock has performed well, climbing 12% since mid-October. A significant percentage of those gains came after Starbucks released its fiscal fourth-quarter and full-year results in early November. The coffeehouse giant stated that sales grew 16% for the quarter, driving a more than 25% gain in EPS. Operating margins soared by almost two full percentage points. Comparable sales jumped 4% globally.

In their fiscal fourth-quarter, Starbucks also opened 690 net new stores, bringing the store total to 25,085 in 75 countries. The said quarter also features a SSS raise of 4%, and an even higher 6% in China.

Yet Starbucks’ shares cratered in December when CEO Howard Schultz announced he would be stepping down from his position for a smaller role in the business this year. Current president and COO Kevin Johnson will take over the CEO role as of April 3, placing Schultz into the role of executive chairman of the board.

Several believe this will turn out to bite the company as it did almost a decade ago; some investors recalled the last time Schultz left the CEO spot, which took place in 2000 just as the overall stock market was moving towards a bear-market period. Yet Schultz will remain with the company, changing his job to monitor at innovation and the growth of the Starbucks Reserve high-end store concept and brand.

A renewed customer loyalty program earlier this year is also proving to be the most successful idea. Last April, Starbucks revamped its reward program which now rewards customers for every dollar spent instead of the number of visits, making it one of the most popular loyalty programs of any retail store. Starbucks also has launched popular mobile initiative, which touched 5% of US transactions in the last quarter.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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