Starbucks to add 2,400 outlets by ’15
Major expansion plans brewing at Starbucks Coffee Co. will stretch the Seattle java giant by adding about 2,400 outlets in two years to give it more than 20,000 stores on six continents.
The company also plans to renovate thousands of locations in the region, executives said at the company’s biennial investor conference Wednesday.
And Starbucks said it is on track to double its system of delivering packaged goods to grocery stores and other vendors to create a revenue stream that eventually would rival the size and profitability of its café locations.
“Starbucks business and brand have never been healthier, and as a company we have never been better positioned to execute against our global, multi-channel growth agenda,” said Chief Executive Howard Schultz at the conference.
Starbucks shares fell 33 cents to $50.79 Wednesday.
In separate forecasts, the company said that it will open 1,500 stores in 70 Chinese cities by 2016, making the country the second-largest market for the chain. And it expects to open more than 3,000 stores in the Americas by 2017. That’s about two new Starbucks stores opening each day in the region — a growth rate that’s giving some investors a sense of deja vu.
In 2008, Starbucks was struggling after expanding too much too fast. The number of stores rose 130% in five years to 16,680 in 2008. Patrons accused the chain of losing its identity as it branched into the record label business, water and food options.
The company’s profit fell in half in 2008 to $315.5 million from the previous year.
Schultz, who had stepped down as chief executive eight years earlier, returned in 2008 to revive the firm. He closed hundreds of stores, wooed back investors and cut thousands of jobs. His tactics helped push Starbucks’ stock up 500% from 2009 to April this year.
Recently, however, investors have once again become wary as Starbucks ramped up its menu offerings.
In November, Starbucks announced plans to buy mall-based tea company Teavana to supplement its Tazo brand in an effort to dominate the $40-billion tea market. In June, Starbucks picked up Bay Area artisan bakery brand La Boulange. Executives said La Boulange goods will be available in more than 2,500 U.S. Starbucks stores by the end of next year.
And by then, Evolution Fresh, the San Bernardino juice brand that Starbucks bought a year ago, will stock its beverages in more than 5,000 domestic Starbucks stores.
With younger customers and a more diverse portfolio than it had a decade ago, Starbucks’ current expansion ploy may pay off, said Jason Moser of the Motley Fool investor guide.
“Management definitely wants to look at this as a second opportunity, having learned from the mistakes from over-saturating the market with their stores earlier,” Moser said.
Still, history could repeat itself, he said. “There’s no question that there’s risk here.”
