Starbucks has grown to become an icon in the global market. The company has over 30,000 locations and is growing.
It's good news for shareholders that there's success outside of North America. It allows a longer runway for growth, expands Starbucks market opportunity, and has an additional benefit of expanding profit margins. China is a big part of Starbucks success.
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Starbucks has the second-largest store concentration in China. China is second with 5,557 locations, and the U.S. is first with 15,500. Starbucks opened 484 net new stores in the first quarter. There were a record number of opened in China in the first quarter.
The superior return on investment is one factor that explains Starbucks increasing interest in China. Starbucks said at its shareholder meeting that stores opened in China delivered a 70% return on investment in their first year. The benefits are rising from lower operations costs in China. In the U.S., labor shortages are more pronounced, and Starbucks has had to raise wages multiple times to get enough workers.
The figures are not specific to China, but they show a similar point. Store operating expenses were 51.8% of revenue for the quarter in North America. In its international segment, that total was just 46.3%. China is included in the international segment. The lower costs of doing business outside the U.S. for Starbucks are highlighted in the figures.
Starbucks has nearly 18 million active rewards members in China, which is more than in the U.S. It was up by 2.6 million from last year. 70% of Starbucks sales in the region were contributed by these members.
Starbucks has 26.4 million active rewards members in the U.S. In China, Starbucks has 3,239 active rewards members per location. It's difficult to say how many new customers Starbucks is adding with each new store opening in China.
Starbucks is emphasizing store development in the region because of the favorable market conditions in China. As the Chinese market presents massive potential for the coffee brand, investors will want to see the positive trends continue for as long as possible.
Starbucks stock is down 31% from its high of a year ago due to a number of factors, including inflation, geopolitical instability, and the Pandemic. The company is trading at a price-to-free cash flow of 23.4 and a price-to-earnings of 28.6. That is a fair valuation for a company with good long-term prospects.
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Parkev Tatevosian owns Starbucks. The Motley Fool owns and recommends Starbucks. The Motley Fool recommends the following options: short April 2022 $100 calls on Starbucks. The Motley Fool has a disclosure policy. score=29.075>
Parkev Tatevosian is the owner of Starbucks. The Fool recommends Starbucks. The short April 2022 $100 calls on Starbucks are recommended by The Motley Fool. There is a disclosure policy for The Motley Fool.
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