- Starbucks earnings Q4 2015 will be announced after market close on October 29.
- Shares of Starbucks are rising in anticipation of great earnings.
- Starbucks is gaining from its mobile strategy and plans to sell beer and wine.
- Taxes could be a problem.
Shares of Starbucks (NASDAQ:SBUX) have been on a tear since mid-August in anticipation of a big number when the company reports results after trading closes on Thursday (October 29).
Those who got in at the low of $52.95 got a real bargain. The stock is currently trading at $63. Some full disclosure. I bought 100 shares at a pre-split price of $35 in March, 2014 and I’m showing a gain of 65% in my retirement account.
Why the optimism? Investors are betting on Starbucks earnings Q4 2015 to come in at 43 cents per share for the quarter ending September 30, on revenue of $4.9 billion. By way of comparison in last year’s fourth quarter the company had earnings of 39 cents/share on revenue of $4.2 billion. The “whisper number” is for earnings of 44 cents.
But it’s not just this quarter that investors are looking at, nor just this year. The company does a huge business in gift cards, and its loyalty program is now being extended through other merchants, like the Lyft ride-sharing service..
Of special interest is Starbucks’ “Mobile Order & Pay” initiative allowing buyers to bypass checkers and have their order waiting for them when they walk in. The company’s mobile initiatives are drawing high praise for enabling fast ordering and increasing brand loyalty. The company’s “concept stores,” like one in London, feature tablets in the hands of roving baristas, ports for charging phones, 100 Mbps WiFi and a bar that serves beer and wine.
Investors are also expecting big things from Starbucks bars, as more of its stores move to open them, extending their sales deep into the evenings. The idea is that its stores will be an all-day destination, a place to go from early in the morning to late in the evening, with food as well as liquor, coffee and tea.
Geographically, Starbucks has also signed a deal to put its coffee counters inside 7-Eleven stores in Taiwan, also known as “OK Stores,” which should be a cheap way to expand dramatically in Asia. Starbucks is also expanding into Italy.
Not everything Starbucks touches turns to gold. Its highly publicized $25 million investment in Square, which is now preparing its IPO, was a big bust for Square. Starbucks has now switched its payment processing to JP Morgan Chase (NYSE:JPM) and it takes $AAPl as well.
There is one cloud on the horizon, and it’s a big one. The European Union wants between $23-34 million over a tax deal it signed with the Netherlands, in which it funneled European sales through that country in exchange for lenient treatment through a defunct shell company called Alki Ltd. According to one story, Starbucks paid just 2.6 million Euros tax on 407 million Euros profit. Starbucks’ pre-tax profits last year were over $2 billion, so the impact of higher tax rates may be no more than the bigger aftertaste of a good espresso.