SBUX | BEAST MODE

Starbucks (SBUX) delivered an incredible quarter.  The company posted a significant increase in traffic trends, a trend which requires us to remove Starbucks from our SHORT bench.

 

This was short lived skepticism for us as we were looking for a downward trend in traffic, lower adoption rates of Mobile Order & Pay, and a decrease in food sales, all of which did not occur. SBUX posted yet another record quarter of performance in 3Q15 reporting yesterday after the close, beating estimates across the board. Q3 revenue was $4.88B versus consensus estimates of $4.87 a 17% increase YoY. Comparable same-store sales (SSS) increased +7% compared to estimates of +6.1%, a 300 basis point increase YoY. Of the consolidated numbers, the Americas segment reported +8% SSS versus consensus of +6.3%, EMEA reported +3% versus consensus of +3.8% and CAP reported +11% versus consensus of +8.5%. Reported EPS ex-items for Q3 was $0.42 versus consensus of $0.41.

 

As you can see the strong performance was global, with no region disappointing. The growth seen in transactions is possibly the most impressive in the quarter, given the number of stores they have, as they are adding stores cannibalization does not seem to be an issue. Two year traffic trends in the Americas segment are turning positive, evidenced by the chart below:

 

SBUX | BEAST MODE - CHART1

 

This is truly one of the best run company’s not only in the restaurant sector but in the world. Management’s great execution across platforms is testament to their long-term strength. And although we are not chart chasers so therefore will not recommend a buy at these levels, we certainly can’t short it here either.

 


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