Starbucks Corp (NASDAQ:SBUX) Earnings Model
Author: Armaan Shah Published: July 31, 2023
Thoughts From the Model Developer...
Starbucks Connect Rollout: As Starbucks Connect gains traction, the integration of licensed stores into the rewards program and mobile ordering ecosystem will likely drive an influx of new customers and encourage repeat business. This heightened customer engagement is expected to contribute significantly to Starbucks' revenue growth. As management plans on increasing the amount of company licensed stores as well as the connect rollout, it will increase revenue among licensed stores.
Starbucks Connect Rollout: As Starbucks Connect gains traction, the integration of licensed stores into the rewards program and mobile ordering ecosystem will likely drive an influx of new customers and encourage repeat business. This heightened customer engagement is expected to contribute significantly to Starbucks' revenue growth. As management plans on increasing the amount of company licensed stores as well as the connect rollout, it will increase revenue among licensed stores.
Technology and Efficiency: I expect, that as Starbucks embraces technological advancements, it is poised to significantly reduce wait times and enhance employee efficiency, especially with occupancy rates rebounding to pre-COVID levels. This strategic integration of technology promises to elevate the customer experience, optimize operations, and drive improved financial performance for the company.
Strength of Rewards program, mobile order & pay: I expect as use of rewards programs and mobile orders will increase as Starbucks begins rolling out its reinvention plan where 35% of new stores will be drive through only.
The Base Case PE multiple has been adjusted from 28x (as of Sept-2022) to 31x (Feb-2023) to reflect the fact that we Starbucks is expected to surpass earnings per year over the next three years in comparison to the rest of the market, and faces the tailwind through its Reinvention Strategy by adding more stores internationally. FOMC members remain hawkish with expectations of a Fed Funds rate over 5% in 2023, however, the market has priced in a similar rate scenario. Note a multiple of 31x is below the historic peak of 37x.
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Disclosure: The author of this article/model has no financial investment or other conflict of interest related to the subject company or other companies discussed. Any views made or implied in the content represent the author’s opinions.