A round of applause for Starbucks

The coffee giant reported close to a perfect quarter.

By Jim Cramer Jul 26, 2013 9:27AM

thestreet logoHow can it all come together so spectacularly in one quarter? That's what I found myself asking when I listened to the Starbucks (SBUX) quarter -- same-store sales were up 8% globally, and the Americas delivered astounding comps of 9%. Who can be that good? This isn't some 800-store chain. This is an established chain with 19,000 locations that is actually accelerating its revenue and increasing its gross margin.

 

That's phenomenal. It is a monument to execution. It's a tribute to the amazing work that CEO Howard Schultz and his team have delivered -- work that has gone beyond our wildest imaginations. The changes at Starbucks were certainly not expected to generate continual 9% growth. In fact, they called that highly unrealistic.

Consider this:

1. Starbucks has now reported its 14th consecutive quarter of comps growing in excess of 5%;

2. operating margin was up 150 basis points;

3. operating income was up 25%;

4. revenue increased 13%; and

5. the company saw an actual increase in Europe, the first in six quarters.

 

All of this is astounding, but here's what's really incredible. The changes at this company are setting the stage for a much bigger Starbucks with a much more ambitious agenda, established in three ways -- through three acquisitions that have already been distinguished as brilliant.

 

A Starbucks Corp., sign is displayed outside a coffee shop in London, U.K. / Chris Ratcliffe/Bloomberg via Getty ImagesFirst, there's the food coming from the national roll-out of Boulange, the bread-and-pastry initiative that is now in 1,000 stores and will be in 2,500 at year-end.

 

Second, there's the non-coffee-beverage business, as spearheaded by the Evolution acquisition.

 

Third, the new Teavana that will produce 1,000 tea stores, triple the current amount, as Starbucks taps into the $40 billion tea market.

 

Don't, by the way, think for a moment that Starbucks will be contained by the Starbucks stores. Expect to see the Evolution drinks at your supermarket, at least at Whole Foods (WFM). Plus, in a little noticed tie-in announced Tuesday, Starbucks is branding a special Danone greek yogurt that will sell at Starbucks and at the supermarket.

 

Will success spoil Starbucks? Does it risk becoming another Panera (PNRA)? That particular company executed badly this quarter, in part because it took too long to order and get food -- something that I saw at my own Panera just last night.

 

Howard put social and mobile genius Adam Brotman on the call Thursday night, and I think the reason has to do with the company adopting best practices involving mobile -- 10% of orders are done by phone. That helps the throughput that is plaguing Panera.

Starbucks is hitting on nine cylinders. I say that because it will have to return to eight soon. It was a stunning quarter, but not all that is replicable, because everything went right. Things will slow.

 

Still, though, it was as close to perfection as I have ever seen a quarter be. That's pretty amazing when you consider that this stock traded at $43 this time a year ago, when Europe plagued the company and China slowdown worries were the mainstay of the conversation.

 

It was truly a quarter for which management should be congratulated.

 

cramer

 


Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.  

 

 

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38Comments
Jul 26, 2013 10:12AM
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I've been to Starbucks exactly 1 time in my entire life - at the airport in Dallas about 15 years ago.  The fruity-looking dude behind the counter looked so confused by my order - a large, black coffee.  Apparently "large" wasn't one of their official sizes, and they didn't sell many cups of plain black coffee.  He gave me about a quart of coffee and charged me like $6 for it.  I haven't been back since.
Jul 26, 2013 10:06AM
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Who said a sucker is born every minute? Starbucks, overpriced burnt coffee or sugary flavored something that maybe used to resemble coffee, and previously frozen stale coffee cake at $3.75 a sliver of 3 bites? I'd imagine their specialy yogurt will be at least $5 for 5 tablespoonsful, nice to have $$ to throw away. Some of them have a captive audience at the I-95 rest stops as it's them or nothing.... I'll pack the cooler thankyou. And No I won't buy the stock, rather have Pepsco or Con-Agra or General Mills,  steadier sales for real food.
Jul 26, 2013 10:53AM
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Next week cramer will write articles on:  matel toys, flowers.com, myspace update, alcoa, goodyear.

 

How’d goodyear get in that mix?  Is it time to sell THEIR stock too?

Jul 26, 2013 10:52AM
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You gotta love that CGT......his motto -  Yesterdays News, Today!
Jul 26, 2013 9:51AM
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isn't this just showing the ends of a bad recession and a return to the old bad habits for many people?

 

"""That's phenomenal. It is a monument to execution. It's a tribute to the amazing work that CEO Howard Schultz and his team have delivered -- work that has gone beyond our wildest imaginations."""

 

 

Jul 26, 2013 2:18PM
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Barry, Leave it to you to look for the few negatives in the economy.Who needs a market up 90%

with Obama?You`re like the guy that gets to a party at 11:00 and watch the guys walking out

with gals that are 10`s and you go in and the only gals left are 400lbs with zits.You missed

boat.

Jul 26, 2013 10:50AM
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We weren't done posting when the call to accelerate the selling came down...Now we are down over 130 points, what a shocker....More later.
Jul 26, 2013 11:09AM
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Dang all cramer needs is some pom poms and a short frilly outfit so he can do his buddy cheer ........it's always the same guys too ....one wonders if they have the same master(s) .....

Sorry for the cramer in a cheerleader outfit visual ....I now realize i may overly excite shloMonicAA and his gerbil swapping buddy DLH......

Have a great weekend all especially you too teabaggers ....weekending together in Gomorrah perhaps ??

: )
Jul 26, 2013 11:22AM
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Buy on the rumor sell on the news. The day Bernanke 1st talked about cutting was the last strength I really saw in this present run up.  I believe we are seeing the top but I wouldn't want to be held to that just yet.  Earnings seemed so flush and positive I am very suspect about the initiation of the selling now.  I never get complacent or accept what any of these Street cats say about anything as truthful.  We have been bumping up to the upper limit and if the Street guys want to make some money they may have to short for a while.  For those who bought puts in the last few weeks congrats.  Me thinks that was a very smart call.
Jul 26, 2013 4:10PM
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Sweet little come back....Flat is good.....Remember, these crooks had this market down over 150 points....Not a bad way to head into the weekend...Will not get any easier next week, better believe that...Have a great weekend all.
Jul 26, 2013 10:10AM
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No real surprises this morning, like we said last night, scumbags will come out with a vengeance this morning and they have, sell, sell, sell is the word....On anything and everything; we may end down for the week unless this afternoon a reversal takes place....Highly unlikely, the volume is low and plenty of these manipulators on and off the floor....We shall see, never give up...More later.
Jul 26, 2013 11:07AM
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4LOVEOFMONEY:I just had breakfast and you mention the Nazi Mirage Guy.He`s probably

still worshiping Hitler at this hour.

Jul 26, 2013 12:53PM
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Hey FAT CAT this one is for you and Barry    (FYB) !
Jul 26, 2013 10:25AM
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DLH2448:Sorry you missed the bull.It must suck to be bitter and miss all that

money.I guess it`s time to count the steers and queers in Texas.

Jul 26, 2013 12:19PM
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Consumer confidence reaches 6 year high ? Who the HELL are these people ?  They run a hell of a bull line ! Presstitutes and Spin Masters will have the sheep believe anything and everything !  GOD BLESS AMERICA !  LAND OF THE FREE ! HOME OF THE BRAVE !
Jul 26, 2013 10:46AM
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Approaching triple digits on the down side now...What a surprise....They own us at the moment....Why? Earnings have been better than expected, consumer confidence was up but remember, they only consider it when its low....Today has nothing to do with facts and/or fundamentals, today manipulators are in total control...That's what's happening down here.
Jul 26, 2013 2:00PM
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Remain cautious....Never forget, when these scumbags are in control sucker's rallies are one of their best weapons....They love to sell on them....Just be careful...More after the close.
Jul 26, 2013 10:44AM
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DLH2448;I`ll never forget, once I was in Dallas,above the toilet it said"Here I sits with

buns a flexen,out my **** comes a Texen."

Jul 26, 2013 11:10AM
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Una mas .....people in Seattle cannot stand Starbucks !! They drinks SBC........

And Peets beats it tastewise hands down !!! 
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