Starbucks Corporation’s (SBUX) popular coffee brand, Seattle’s Best Coffee, recently opened 10 new drive-thru cafes in the Dallas/Fort Worth area in a single day. Another four are due to be opened by late summer 2013.
In addition to high-quality arabica coffee beverages, the drive-thru windows will also offer breakfast sandwiches, biscuits, muffins, stuffed pretzel melt, sweet or savory pies and dessert-inspired specialty coffee drinks.
Drive-thru stores are becoming extremely popular these days. Of the 3,000 stores that Starbucks expects to open in North America by 2017, more than half will be drive-thru coffee shops, which generate incremental revenues and profits compared to traditional stores. Again, more than half of the 3,000 stores will be in the U.S alone. Further, the company will remodel many more in the Americas region in order to capitalize on the strong demand for Starbucks products in America.
The Americas business has witnessed a substantial turnaround in the last couple of years and revenues grew an impressive 7% in fiscal 2011 and 9% in fiscal 2012. Starbucks’ U.S. operations account for almost two-thirds of the consolidated total net revenue of the company. The $8 billion business has grown well past its previous peak in terms of average unit volumes, store profitability and cash at the store level. The segment regularly posts an operating margin of around 20%, which is expected to improve further through new store openings, remodeling of existing stores and new product launches.
Starbucks carries a Zacks Rank #3 (Hold). The company has compelling growth drivers, like La Boulange bakery products, Verismo, Evolution Fresh juices, Teavana tea and K-Cups portion packs, to sustain the earnings momentum in the upcoming quarters.
Bloomin' Brands, Inc. (BLMN) and CEC Entertainment Inc. (CEC), both carrying a Zacks Rank #1 (Strong Buy) and Burger King Worldwide, Inc. (BKW), carrying a Zacks Rank #2 (Buy), are other stocks worth considering in this space.
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