28
Starbucks
No food chain has grown as fast as Starbucks, and it shows no signs of slowing. Under CEO James Donald, it plans to boost earnings by 20% to 25% annually over the next three to five years and to bring its number of storefronts to 40,000 worldwide—10,000 more than McDonald’s. Starbucks is conservative in how it finances its goals: Operating cash flow from existing stores pays for new-store development. So far, the return on new stores has been excellent. Increasing same-store sales has been a tougher order, though, and Chairman Howard Schultz has expressed worries that moves to improve same-store sales with automatic equipment and off-brand merchandise could be turning consumers off.
| Overall Grade | A |
|
| Market Data | SBUX | |
| Market Value (2/28/2007) |
$23.4 Billion |
|
| Profitability* | 30.4% | B+ |
| Sales Growth Rate** | 23.2% | A- |
| 12-Month Sales | $8.2 Billion |
|
| 12-Month Net Income | $0.6 Billion |
|
| Total Return | Past 12 Months-14.9% | Past 36 Months65.2% |
| Economic Sector | Consumer Discretionary | |
| Industry | Restaurants | |
The overall sector letter grade reflects how the weighted average of the return on income, or return on equity, and sales growth grades compare with others in the same sector. For the overall grade as well as the ROE/ROI and sales growth grades, an "A" places a company in the top 7% of its sector and an "A-" in the top 14% of the sector. The actual ranking was done using the underlying numerical measures. Grades are for information only.
* For nonfinancial companies, three-year average pretax operating profit before interest and special items as a percentage of average invested capital. For financial companies, pretax profits as a percentage of average shareholder's equity.
*Three-year average annual sales growth based on the most recently reported 36 months, calculated using the least-squares method.
$FOOTNOTE
