Starbucks Corporation (NASDAQ:SBUX) is slated to report its second-quarter results this Thursday, and there is good reason to be bullish. Starbucks stock struggled during the first half of last year, but finished 2018 strong. That momentum has continued into 2019.
SBUX had been underperforming the S&P 500 up until November, but then it reignited investors’ confidence in its vision. Not even the very public failure of its tea initiatives has been able to hold Starbucks stock back for too long. Starbucks continues to innovate and expand its retail presence. The company’s financial results, especially its Q1 earnings, showed that its overall vision and execution are working.
Over the past year, Starbucks stock is up 32%. There is plenty of reason to believe that the momentum of SBUX stock will continue through the upcoming quarter and through the remainder of 2019.
Starbucks Stock Reported Strong First-Quarter Results
SBUX electrified the owners of SBUX stock with its huge first quarter. SBUX reported that its net revenue surged 9%. reaching a record $6.6 billion. Its global-comparable-store-sales growth rose 4%, and its China comp sales ticked up 1%.
Despite its large size, SBUX is delivering growth in the U.S. and China. U.S. comparable store sales rose as a result of Starbucks’ focus on improving its digital offerings, as well as its in-store experience.
Starbucks continues to be one of the savviest retailers when it comes to leveraging digital tools. The number of active members in Starbucks’ U.S. rewards program increased 14% in Q1 to 16.3 million members. The program provides a treasure trove of consumer data to SBUX and helps it better understand how to serve its customers. It’s not exactly a revenue driver, but it shouldn’t be overlooked, either. Data is king.
Starbucks Stock Will Benefit from the Company’s Accelerated Share Repurchase Program
Starbucks’ success has allowed it to return a great deal of capital to the owners of Starbucks stock. For instance, Starbucks has committed to repurchasing $2 billion of SBUX stock between March 2019 and June 2019.
Over a three-year period through fiscal 2020, SBUX has committed to returning $25 billion to shareholders in the form of share buybacks and dividends. It has already spent $14 billion of those funds. This accelerated program should boost Starbucks stock.
Starbucks Re-imagines the “Third Place”
Good numbers are only one part of the equation though. Starbucks knows that. The market demands innovation and new ideas. Starbucks has really delivered in that area under its CEO, Kevin Johnson, and Starbucks stock has responded positively to its innovations.
SBUX coined the concept of the “Third Place,” which is supposed to transform Starbucks to the third place where people spend time, other than their homes and jobs. SBUX is re-imagining the concept in an effort to amplify its brand, and this will further establish them as the standard bearer when it comes to convenience, comfort and connection in the world of food and beverage retail .
Starbucks is razor-focused on this branding initiative, which includes changes in its interior décor and a $100 million investment by SBUX in the Valor Siren Ventures fund, which focuses on “the next generation food and retail start-up companies.”
I’m impressed with Starbucks’ decision to use a dynamic approach to get new talent and enhance its innovations with outside input. It’s because of Starbucks’ focus on the future that I am confident that Starbucks stock will continue to beat expectations in coming quarters.
As of this writing, Luce Emerson did not hold a position in any of the aforementioned securities.