Starbucks becomes No. 3 restaurant chain
The coffee shop ranks behind McDonald's and Subway in terms of US sales. Updated with earnings numbers.
Starbucks (SBUX) might have started as a coffee shop, but it now counts as a chain restaurant -- and it's become the third-largest in the U.S.
When measured by sales dollars,McDonald's (MCD) tops the chart, and Subway comes in second. Starbucks is No. 3, according to a study by research firm Technomic. Not bad for a company that closed thousands of stores and went through its own mini-crisis in the economic recession.
Starbucks' rise is certainly bad for Burger King and Wendy's (WEN), which used to round out the top three behind Mickey D's.
Still, all is not well at Starbucks today. The company's share price dropped nearly 2% in after-hours trading after it disappointed analysts with its profit forecast for 2011. Before today, shares had zoomed 30% in the last year to $37.18.
Post continues after this video about how well Starbucks is doing:
Starbucks said that while sales were strong, profit in the quarter was affected by the earthquake in Japan and the bankruptcy of Borders Group (BGP). Profit was $261.6 million, or 34 cents a share, a 20% increase from a year earlier. That 34 cents a share is exactly what analysts wanted to see.
The company reported a 10% jump in revenue to $2.8 billion, above the $2.73 billion analysts were anticipating. Comparable store sales rose 7% -- which breaks down to a 6% increase in traffic and a 1% increase in the average customer receipt.
But earnings for the full year, the company said, would be between $1.46 to $1.48 a share -- lower than the $1.50 a share analysts were expecting.
"Our sales, traffic and customer trends all point to the expanding power of the Starbucks business and brand," said chief executive Howard Schultz in a statement. Chief financial officer Troy Alstead also crowed: "The underlying health of our business has never been better and our fiscal second quarter results continue to demonstrate this strength."
The company is expanding beyond the coffee shop, and it plans to get more products into grocery stores. Starbucks is even joining the K-Cup mania, working out a deal with Green Mountain Coffee Roasters (GMCR) to offer its brew for Keurig machines.
One reason for Starbucks' success is that consumers feel the chain is healthier than other fast-food offerings, a Technomic spokesman told Marketplace radio. Subway benefits from that impression as well.
And what about Burger King and Wendy's? "They've found it harder to compete with the McDonald's of the world, as well as what we're seeing in the better burger segment with fast, casual giants like Five Guys Burgers and Fries really coming up the ranks and kind of chomping at their heels in terms of the burger market and what they're able to offer," said the spokesman, Darren Tristano.
Starbucks gets about 70% of its revenue from the U.S. and is expanding quickly overseas.
The economy has recovered to the point where stores catering to higher-income people are doing well, one analyst told Reuters. Starbucks falls squarely into that category. "I think the trade-up is on again," the analyst added.
Starbucks has raised prices as the cost of coffee has gone up. The price of its packaged coffee sold in supermarkets has gone up by an average of 12%, Reuters reported.
" Starbucks prays on the stupidy of Americans who pay big bucks for a stupid cup of coffee"
I didn't know Starbucks was religious; what form of religion is stupidy anyways?
"Interesting, that one assumes that a successful corporation is "praying" on the week. "
What instead of coffee of the week it'll be a prayer of the week? (At least this guy got the concept somewhat correct.)
I've found on the internet people who bash a company or article or call people stupid usually lack proper grammar, spelling, and a basic grasp of word meaning.
Oh we were talking about Starbucks?
It's decent coffee, decent food. I go there multiple times a week, enjoy Clover brewed coffee, and get free drinks quite often thanks to the Starbucks Rewards program. Maybe they "price" stupid people out by charging the same for a cup of coffee as most places?
Prays on Americans "stupidy" (Stupidity)? Last time I checked each american has the right to select what and what they do not want to purchase or patronize.
Interesting, that one assumes that a successful corporation is "praying" on the week. Why does there have to be ulterior motive. We enjoy a good cup of coffee and it turns into a plot.
I order a tall drip coffee, not the lattes. and really, Penahs, that is not stupid.
My coffee only costs $1.68 including sales tax. Enjoy the Starvbucks environment..
I have stock in the company and am very happy it has re-energized and is growing.
Re the below comments doggin each other, it's "prey" not "pray."
I don't give Starbucks my money because I like a certain fast food places coffee.
Starbucks' business success is amazing considering what they sell.
Do we consider Starbucks a restaurant or its own category, "Starbucks."
Comparing Starbucks to McDonalds is strange, except I really like MickeyD's coffee. But that's me.
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The solid report comes a month after the retailer closed all of its Canadian operations.
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