2020 is coming to an end. In this extraordinary year, the world is shrouded in the haze of public health events. Most industries around the world have been affected to varying degrees, and the catering industry is the hardest hit. Up to now, global public health events have not yet been fully controlled, but the American coffee chain giant Starbucks has gradually got rid of the impact of public health events, and its stock price has even hit historical highs. If you calculate from the low point during the year, Starbucks has rebounded more than 100% from the low point in March.
Earnings performance is better than expected
The fundamental reason why Starbucks' stock price can rise sharply is that the company has gradually got rid of the negative impact of global public health events. According to the company’s fourth-quarter 2020 financial report, the company’s revenue was US$6.2 billion. Although a year-on-year decrease of 8.1%, the month-on-month increase was as high as 46.9%, which was better than the market’s previous expectations of US$6.05 billion. Adjusted earnings per share were US$0.51, better than market expectations of US$0.31.
At the same time, the fiscal year results announced at the same time showed that Starbucks' fiscal year revenue was 23.518 billion US dollars, a year-on-year decrease of 11.3%. The total expenditure was 22.279 billion US dollars, down 2% year-on-year. Net profit was US$923 million, a year-on-year decrease of 74.2%. Starbucks estimates that the company's revenue in fiscal 2021 will be between 28 billion and 29 billion US dollars.
Optimistic prospects for the future, focusing on the Chinese market
Although the company's net profit was greatly reduced by global public health events, Starbucks is still very optimistic about the future, which can be seen from the company's strategy to open more stores. Starbucks expects that starting from the 2022 fiscal year, the company will achieve a net increase of about 6% of new stores worldwide each year. By the 2030 fiscal year, the number of Starbucks global retail stores will reach 55,000.
The Chinese market is one of Starbucks' two largest markets in the world and the company's fastest-growing market. Starbucks will continue to increase its size in the Chinese market in the future. Starbucks expects to open 600 new stores in China in 2021, and the number of Chinese stores will reach 6,000 by the end of fiscal 2022. In addition, Starbucks this year also invested 130 million U.S. dollars to build a Starbucks Coffee Innovation Industrial Park in Kunshan, Jiangsu. This is the company's largest productive strategic investment outside the United States, and it demonstrates the company's emphasis on the Chinese market.
Take new steps
During the raging global public health incidents, people changed the habit of buying coffee to eat in stores. Starbucks took a number of measures to improve its online ordering, drive-through, take-out and self-pickup service capabilities, and non-contact purchases and retrievals. The delivery method has adapted to consumer behavior during the health incident and achieved good results. Starbucks plans to continue to promote these measures in the future. It is reported that currently 35% of the stores in the US market are fast-track stores, and the company plans to increase this figure to about 45% in the future. Among the 600 new branches to be opened in China in 2021, this type of branch will account for 10%.
In addition, Starbucks continues to accelerate its digital transformation. Recently, Starbucks and Ctrip have launched joint rights. Users of both parties can obtain each other's rights or coupons by purchasing gift packs or annual cards on their respective platforms. It is reported that Ctrip has more than 400 million members worldwide, and the new customers of Ctrip in the past three years are mainly young people, and young people are the main consumer group of coffee. The cooperation between Starbucks and Ctrip is a win-win for both parties. .
Institutional perspective
Many investment banks on Wall Street also look at Starbucks differently. For example, analysts at Oppenheimer and Barclays Bank have given Starbucks higher target prices. Oppenheimer raised Starbucks' target price to $112, while Barclays Bank gave Starbucks an overweight rating and raised its target price to $117. Investment banks believe that Starbucks is a company that continues to grow dividends, and continued international expansion will pave the way for the growth of the company and its stock.
Conclusion
Starbucks' recovery from the impact of global public health incidents is astonishing, and it has stood out in this crisis, demonstrating the resilience of this coffee giant. With the company's steady pace of expansion and the company's acceleration of digital transformation and exploration of new retail, Starbucks' position as the No.1 coffee industry in the coffee industry will remain solid. It is believed that as the impact of global public health incidents gradually dissipates, Starbucks' revenue is expected to grow steadily, and its business may exceed the previous historical peak, and Starbucks stock is also worthy of long-term investor attention.