Delivery Is HERE! What Does it Mean for Starbucks Corporation Stock? (SBUX)

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Only in America. Starbucks Corporation (SBUX) began delivering for the first time today, out of a specialty location in the Empire State Building in New York City.

Delivery Is HERE! What Does it Mean for Starbucks Corporation Stock? (SBUX)But don’t get too excited, New Yorkers. You can only order if you’re within the building, and it doesn’t take walk-in customers. Still, investors might find themselves wondering what this on-demand service means for the future of SBUX stock.

Starbucks stock has dramatically outperformed the market in 2015, with shares up 48% to the S&P 500‘s -2% return. It’s outperforming other consumer stocks like Chipotle (CMG), Dunkin Brands (DNKN), and Keurig Green Mountain Inc (GMCR) by leaps and bounds as well.

But with SBUX stock trading at 32 times forward earnings — and considering Starbucks delivery is only a “thing” at one location — is the new system actually material to the company’s future?

Starbucks Delivery: Merely in Test Mode

The Empire State Building location should simply be thought of as a test model, a prototype, for future locations. Although SBUX has said it plans to open more delivery-only locations in the future, the company has refused to expand on how and where those stores will materialize.

What is clear is that SBUX truly understands the importance of customer convenience. It famously championed the mobile payments revolution, encouraging customers to order through their app. Earlier this year, the company reported  that customers were using mobile payments 7 million times per week, and that 16% of its transactions were conducted via mobile.

Not only is SBUX making it easier for tech-savvy customers to buy coffee, but the company is acquiring new customers that way — new customers that are likely to remain around, especially since the Starbucks mobile app is integrated with the My Starbucks Rewards initiative, a loyalty program.

This newest Empire State Building location smartly leverages the My Starbucks Rewards program by requiring customers to log in using their accounts to pay. Within 30 minutes, someone will be wheeling around with your hot coffee.

The logistics behind the so-called Green Apron Delivery service will be tested early and often, and should serve as a proving ground for future locations.

New Sales or Shifting Sales?

The real unknown, and the most vital data to come from this location, will be whether in-office sales will cannibalize sales at other nearby SBUX locations.

One would think that the answer to that question is an unqualified “yes,” but sometimes intuition can deceive us.

For example, the company recently opened a much smaller “express” Starbucks on Wall Street for busybodies in the financial district. SBUX has noted that sales at a normal cafe location down the street were relatively unaffected.

While questions remain about how scalable the first Starbucks delivery location will be, they’ll never know until they try.

And given CEO Howard Schultz’s track record of execution, I wouldn’t start doubting him now.

As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/10/starbucks-corporation-sbux-stock-delivery/.

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