Last night, Starbucks (SBUX) announced that it was buying the chunk of its Japanese business it didn’t already own for more than $900 million. Wells Fargo’s Bonnie Herzog and team call it a “wise strategic move” for Starbucks:
Reuters Japan is currently a very strong market for Starbucks. It has had solid 4%+ comps over the past several years, and has amongst the most profitable stores in the Starbucks network due to high transaction and average tickets that drive store margins to the low to mid-20%'s. This transaction accelerates overall growth in several ways as it will: (1) speed up new stores in Japan, including drive-thrus; (2) grow Starbucks sales in CPG, licensing and foodservice; (3) significantly expand sales in the underpenetrated RTD coffee category in which Starbucks currently only has a ~2% share; (4) fully leverage Teavana in a tea centric market; and (5) expand mobile/digital capabilities and key learnings from Japan to the rest of the world. As a result, we expect that the accretion from this transaction will continue to grow over time…
Further, we believe this deal provides Starbucks with another avenue to leverage its robust innovation pipeline, impressive execution abilities and financial discipline.
Shares of Starbucks have gained 1.3% to $74.94 at 11:53 a.m.
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