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Friday, November 17, 2006

Investors Get Ticked At Starbucks (SBUX)(MCD)

Wall St. took shares in Starbucks down by over 5% after hours as the company announced a 21% improvement in quarterly revenue to $2 billion. The company forecast that it would open 2,400 stores in the next twelve months. It also said that investors could expect another 20% increase in revenue.

Profits dropped 5.6% to $117 million, but this was due to changes in the company's accounting policies.

The key to the numbers was simple. Starbucks is still growin 20%. It grew 20% in fiscal 2005. It grew 21% in the recent quarter. It forecast 20% growth for next year. Off of an annual revenue run rate of $8 billion, the figure is extraordinary.

Starbucks has the stated and ambitious goal of eventually having 40,000 stores worldwide. At the end of this fiscal year, the figure was about 14,000, and, if the company's projections are right, that will be nearing 17,000 twelve months from now. Starbucks still has a reasonable chance of hitting its number within the next ten years.

McDonald's has over 30,000 stores, so why shouldn't Starbucks.

Why not, indeed.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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