Starbucks Corp (NASDAQ:SBUX) Earnings Model
Author: Keshi Edirisinghe Published: July 31, 2023
Notes from the model developer...
Customers have been ordering more premium and specialty cold coffee beverages with increased customization. I expect this trend to continue. According to The Brainy Insights, a global market research consulting firm, the global specialty coffee market is expected to go to USD 153 billion by 2030 from USD 54 billion in 2021. This is especially apparent in markets like North America, Western Europe, and East Asia.
Customers have been ordering more premium and specialty cold coffee beverages with increased customization. I expect this trend to continue. According to The Brainy Insights, a global market research consulting firm, the global specialty coffee market is expected to go to USD 153 billion by 2030 from USD 54 billion in 2021. This is especially apparent in markets like North America, Western Europe, and East Asia.
Taking the U.S. as an example, research from the National Coffee Association found that consumption of coffee had reached a 20-year high; 43% of surveyed consumers reported drinking a specialty coffee beverage in the past day, representing a 20% increase from January 2021. Research predicts that the North American specialty coffee market will grow by 20% YoY until 2030. Furthermore, Europe is also one of the most important markets and currently has the largest share of the global specialty coffee market at around 46.2%. Its markets growth is expected to grow by 9% by 2026. The Asia-Pacific specialty coffee market, meanwhile, is also growing rapidly, with the region’s growth rate predicted to be 15.3% by 2030. Starbucks will benefit greatly from this trend as it offers more than 170,000 ways for customers to customize their coffee to suit their lifestyles and cravings, a feat its competitors have yet to replicate. Evidence of this customization positively impacting Starbucks’ topline recently is in Q1-2023 where beverage sales increased 13%, led by strength in its espresso category and holiday beverages like Caramel Brulée Latte and Cookie Almond Mild latte.
To reflect my views, in the North American segment, I have grown average revenue per company operated store by mid-to high single digit growth of ~6% - 8%, towards the end of FY2023, FY2024, and FY2025, whilst also accounting for seasonality in Q1 and Q2 for FY2024 and FY2025. Furthermore, North American store OpEx will decrease 10 bps each quarter compared to previous fiscal year, until fiscal year 2025 due to sales leverage. For the International segment, I have forecasted average revenue per company operated store to grow by mid-single digits of 5 - 6% in Q3-2023 and Q4-2024, as well as Q1-2024 and Q2-2024 to reflect uncertainty in the Chinese market. However, by H2-2024 through end of FY2025, I expect to see HSD growth of ~7% - 9%, whilst accounting for seasonality. International OpEx as % of company operated stores will decrease by 5bps for Q4-2023, Q1-2024, and Q2-2024 then decrease by 10bps from H2-2024 to end of FY2025, reflecting its sales leverage...click to continue reading
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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.