An Investor's Guide To Starbucks Corporation (Part 5 of 18)
Same-store sales driver
In the last part of this series, we learned that Starbucks’ (SBUX) same-store sales drive revenues. Same-store sales are driven by transactions and ticket growth. Traffic means the number of guests that come into the store. Ticket means the average amount that each customer pays per order.
Ticket
In 2014, SBUX’s ticket reached its 2010 levels—as seen in the above chart. The ticket is driven by price and product mix. While the company has limited flexibility to increase prices, it can change the mix to increase the ticket per customer. For example, SBUX launched the La Boulange food platform in 11,000 stores in the US. It gave customers the opportunity to order food along with the beverages.
Transactions and ticket growth
In the above chart, we can see that transactions have a much higher impact on same-store sales growth. If we look at the correlation of 0.81, it indicates a strong relationship between same-store sales and transactions. This means that SBUX’s revenues depend on customers walking into its stores and making transactions. However, fewer customers are visiting SBUX year-over-year, or YoY.
Although revenues grew ~10% in 2014, the growth declined from 13.6% in 2012 and 11.9% in 2013. It was 6% in 2012. It declined to 5% in 2013. Transactions were 3% in 2014. Over this three-year period, transactions declined in all three regions:
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Americas
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EMEA (Europe, Middle East and Africa)
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China and Asia-Pacific
Other growth strategies
The declining transactions and same-store sales don’t necessarily signal trouble for SBUX. The company has been aggressively growing its units. For example, Panera Bread (PNRA) is growing its revenues by adding units. Chipotle Mexican Grill (CMG) is also growing its revenues. It’s using same-store sales and unit growth strategies.
In contrast, McDonald’s (MCD) saturated its market in the US. It doesn’t have room to add more units. As a result of the shifting trends, the same-store sales are declining.
Some of the restaurants mentioned above are also included in the SPDR S&P 500 ETF (SPY).
In the next part of this series, we’ll look at SBUX’s growth strategies.
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