Starbucks Corporation Case: What method will Starbucks use to

Case Study

 

Starbucks Corporation is an American coffee company and coffeehouse chain.  Starbucks was founded in Seattle, Washington in 1971.  As of November 2016, it operates in 23,768 locations worldwide, including 13,107 (+170) in the United States, 2,204 (+86) in China, 1,418 (-12) in Canada, 1,160 (+2) in Japan, and 872 in South Korea (bumping United Kingdom from the 5th place) (Differences reflect growth since January 8, 2016).

 

Starbucks first became profitable in Seattle in the early 1980s, and despite an initial economic downturn with its expansion into the Midwest and British Columbia in the late 1980s, the company experienced revitalized prosperity with its entry into California in the early 1990s.  The first Starbucks location outside North America opened in Tokyo in 1996; overseas properties now constitute almost one third of its stores.  The company opened an average of two new locations daily between 1987 and 2007.

 

On December 1, 2016, Howard Schultz announced he would resign as CEO effective in April 2017 and will be replaced by Kevin Johnson.

 

 

Final – Due Week 7 of the Course

 

A. Forecast Development Tab – Sales Revenue Forecast Development

1.        
As an analyst, how would you analyze the sales growth projections of Starbucks?

 

2.        
How many years into the future would you as an analyst be willing to commit to in the sales forecast?

 

3.        
Going back to the risks, what are the external factors that could change (increase or decrease) the sales revenue forecasts of Starbucks?

B. Forecast Development Tab – Foreign Operations. CPG and CAP (Segments)

1.     
Which region/market is growing the fastest? Which is the most profitable? As an analyst, would you invest in the fastest growing or most profitable segment?

 

2.     
What method will Starbucks use to translate its foreign subsidiaries’ financial statements so that they can be consolidated?

C. Forecast Development Tab – Capital Expenditures, FF&E

1.     
As an analyst, what can you ascertain from the capital expenditure forecasts? Is this good or bad?

2. As an analyst, what can you ascertain from the FF&E forecasts? Is this good or bad?

D. Valuation Tab – Valuation Parameter Assumptions

1.     
In the parameters, as an analyst, what are the most important variables and why?

 

2.     
Are dividends an important variable in the valuation of Starbucks?

E. Valuation Tab – Estimated Value per Share

 

Describe each of the following and identify strengths and weaknesses in each. Why are there so many different valuations?

1.     
Dividend Based Valuation

 

2.     
Free Cash Flow Valuation

 

3.     
Residual Income Valuation

 

4.     
Residual Income Market-to-Book Valuation

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