|
|
Post by Equity Section on Mar 12, 2013 12:49:07 GMT 5.5
In 1971, Starbucks opened up its first store in Seattle's Pike Place Market. Today, 42 years after opening first store in Seattle, Starbucks operates in 61 countries, and recently had the most successful launch ever, in India. They have now 18,066 plus stores throughout the globe, out of which 52% is company-operated and 48% is licenced. Revenue from company-operated stores account for 79% of total revenues. They strive to have 20,000 plus stores on 6 continents by 2014. They recently launched Verismo system that enables loyal Starbucks fans to have brewed or latte beverages of Starbucks quality in their homes. In 2012, Starbucks launched Starbucks Via Ready Brew Sales shipped 500 million K-cup packs to cater to premium single cup market. They also cater to lighter roast category of around 40% through Pumpkin Spice, Peppermint Mocha and Starbucks Blonde roast. Starbucks also made three startegic acquisitions: La Boulange bakery products; Evolution Fresh that caters to health and wellness by bringing high-quality juices; Teavana brand that caters to tea. Overall, Starbucks generate revenues through company-operated stores, licensed stores, consumer packaged goods ("CPG") and foodservice operations. Overall, in addition to flagship Starbucks brand, portfolio comprises of Tazo® Tea, Seattle’s Best Coffee®, Starbucks VIA® Ready Brew, Starbucks Refreshers™ beverages, Evolution Fresh™, La Boulange bakery brand and the Verismo™ System.
Beverages still account for 75% of total sales, while food accounts for 19%. American market contributes to 75% of total sales.
|
|
|
|
Post by poojasharma on Mar 25, 2013 21:22:26 GMT 5.5
|
|
|
|
Post by Equity Section on Mar 26, 2013 10:43:03 GMT 5.5
Since, we have talked about what the company is doing above. What is its situation right now? Now is the time to analyse Starbucks financially. We have to understand its Sales growth, its operating margins & net profit margins. We must understand the financial figures completely now. |
|
|
|
Post by Equity Section on Mar 26, 2013 21:15:39 GMT 5.5
As deep as I'm looking into Starbucks, they have a very complex shareholding structure. The total number of shares including options have been increasing every year. Such an action tend to dilute the value of shares being held by existing investors. ALso, you never know the quantum od dilution that will happen in the future. This is a negative about being invested into Starbucks. Though they have repurchase equities this year, but at the same time they issued options too.
|
|
|
|
Post by poojasharma on Mar 27, 2013 1:31:27 GMT 5.5
Well, talking about the complex structure of Starbucks Shareholding, I think it wouldn't hurt investing in for short term (say 6 months).
|
|
|
|
Post by Equity Section on Mar 27, 2013 9:29:23 GMT 5.5
Well, talking about the complex structure of Starbucks Shareholding, I think it wouldn't hurt investing in for short term (say 6 months). Investing is never about short-term. Its always about long-term. There is difference between price volatility and fundamentals of business. Price volatility depends upon the perception of people involved in trading of the shares. And, perception of people is mostly speculative and they tend to panic at the very first instance.
Fundamentals of the business, on the other hand, results from what the business does. As shareholders, we wish our companies to perform optimally and increase shareholder value which results from the business operations. Thus, as shareholders, we must concentrate on the sales, margins & debt levels of the company rather than the price fluctuations.
Now, of course, there're two stages involved in investing. One is understanding the business and the other is buying their shares at the stock market. Lets say, a particular business is well understood and is a very profitable one & is excellent from shareholders' point of view. Now, on the valuation front, too, it seems value enough to buy currently. We go & buy the shares. Now, next day, Greece or Cyprus defaults their sovereign debt and Dow Jones drops 200 points. Your company in which you just invested also falls 30%. Now, what're you going to do about that. In my opinion, you should start buying it at those levels again. Now, remember, this is the case of a company whose fundamentals are excellent and you're confident.
On the other hand, we have a company which has a very complex shareholding structure and which is diluting shareholders' value year after year. Such a company has got question marks in the very first place. Now, tomorrow, when Dow falls and this company drops 40%, how are you going to justify your another bout of buying knowing at the very first place that this company is not conducive to shareholders' returns.
My overall point in this write-up is that you can't time markets. You can never know about price spurts because its based upon speculators frenzy and not upon fundamentals. And, surely, you can't invest from a viewpoint of 6 months. 6 months is a too small time-frame. You have to atleast understand your business in the context of future 3-5 years. Thus, that makes investment a long-term game and one has to be careful about it. Two or three businesses in a lifetime can make a person very-very rich. So, we need not run after every holy cow. We need careful selection and just one company to make it big. |
|
|
|
Post by Equity Section on Mar 27, 2013 12:20:13 GMT 5.5
But anyways, if you'll look at the shareholding dilution, in the past 4 years, there has been hardly 3.6% dilution or increase in shares. While at the same time, Earnings per share increased 3 times. That can make you feel that shareholding dilution is negligible and has overall no effects on Starbucks. Now, this was largely because of near doubling of Operating Margins of Satrbucks between 2009 & 2010. Since then growth in earnings has tapered off. Between 2010 & 2011, there was 30.65% growth in EPS while between 2011 & 2012, growth in EPS is hardly 10.50%, primarily because of higher taxation.
|
|
|
|
Post by poojasharma on Mar 28, 2013 4:14:28 GMT 5.5
You are right. So, I will look for some other companies and do some numbers.
|
|
|
|
Post by Equity Section on Mar 28, 2013 8:42:46 GMT 5.5
But as I dug deeper into Starbucks and worked with numbers, this company ha s huge Return on Capital Employed. Plus, it has done some keen acquiitions in late 2011 & 2012, the full impact of which should come in the current financial year. So, it'll take a bit more time about working with the numbers.
|
|
|
|
Post by Equity Section on Mar 28, 2013 11:42:56 GMT 5.5
But as I dug deeper into Starbucks and worked with numbers, this company ha s huge Return on Capital Employed. Plus, it has done some keen acquiitions in late 2011 & 2012, the full impact of which should come in the current financial year. So, it'll take a bit more time about working with the numbers. This gives us our first lesson. Never scratch the surface. Always dig deeper.. |
|
