Why Citigroup Is Bullish On Starbucks


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In a new report Citi Gregory R. Badishanian says Starbucks is one of their top restaurant picks.The coffee giant’s shares have been up 13% year-to-date. Its U.S. business is expected to benefit from high-end consumers, while its international operations continue to show progress.

The breakdown:

  • Its U.S. business is expected to do well. The stores are expected to get better, not just bigger, and same store sales are set to grow over the next three years. This combined with cost cutting is expected to increase its profits.
  • The Starbucks consumer products group gives the brand an opportunity to use its retail store model and branch out through supermarkets, cafeterias, vending machines etc. 
  • The company is expected to use initiatives that turned around its U.S. business in the international arena. New products are expected to push same store sales and boost margins from FY2011 and FY2013.

  • The company is expected to show sustainable growth and strong margin expansion in the long-term. Its earnings are expected to increase as well.

The company does however face risks, the biggest would be a change in consumer slowdown. The chart below however compares its same store sales in the domestic and international market.

starbucks chart

[credit provider=”Citi”]

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