Starbucks sees room to expand with plan to add 12,000 cafes globally

Starbucks Chairman and CEO Howard Schultz delivers remarks at the Starbucks 2016 Investor Day in Manhattan, New York on Dec 7, 2016.
Starbucks Chairman and CEO Howard Schultz delivers remarks at the Starbucks 2016 Investor Day in Manhattan, New York on Dec 7, 2016. PHOTO: REUTERS

NEW YORK (BLOOMBERG) - Starbucks plans to add 12,000 locations globally in the next five years, signaling that the world's largest coffee-shop chain still considers brick-and-mortar expansion a major part of its growth strategy.

The target includes expanding to 5,000 cafes in China, the company said Wednesday in a statement. The global goal would bring Starbucks' total store base to 37,000, a 48 per cent increase from its current level.

The plan shows that Starbucks - which has increasingly relied on mobile technology, food and its premium Reserve brand to fuel revenue gains in recent years - thinks that it still has room to grow. The responsibility for executing on the initiative will largely fall to Chief Operating Officer Kevin Johnson, who's taking over the chief executive officer role from founder Howard Schultz in April.

"These are the early days of the growth and development of the company," Mr Schultz said during a presentation to investors.

The shares rose 0.3 per cent to US$57.60 (S$81.7) at 8:49 a.m. in early trading in New York. Starbucks had fallen 4.3 per cent this year through Tuesday amid concern that its growth may slow.

The company also laid out financial targets for the next five years. Revenue will rise by 10 percent a year, earnings per share will expand 15 percent to 20 percent, and comparable-store sales will increase by a mid-single-digit percentage.

Driving those gains will be an increased emphasis on food, a category where Starbucks projects it can double growth. The company is introducing new items next year, including Sous Vide Egg Bites and a gluten-free breakfast sandwich. Sales of the chain's existing breakfast sandwiches have doubled in the past four years.

On the digital front, Starbucks is adding a "conversational ordering system" powered by artificial intelligence to its mobile app.

"There's so much more growth, so much more opportunity, leveraging technology, leveraging innovation, and you can see that come through in what we do," Schultz said.