Is There Room for Another 8,000 Starbucks?

By Markets Fool.com

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You might think you're seeing double -- or triple -- as Starbucks ramps up its store expansion plans.

It's almost like a joke The Onion ran a couple of years ago about a new Starbucks opening up in the bathroom of an existing Starbucks: the coffee shop says it wants to open 8,000 more restaurants over the next five years, eventually growing to 30,000 stores.

That's the equivalent of more than four Starbucks opening every day of every year for the next five years. If not within already existing Starbucks, where will we fit them all?

All aboard the Orient Express
Starbucks says the answer to this question is China. At its annual shareholder meeting last week, the coffee shop said the Orient is its fastest growing market. Over the past four and a half years, it's grown from 400 stores to 1,600, or a rate of less than one a day. However, by 2019, it expects to open another 1,800 stores there, or 1.5 a day.

The Asia-Pacific region in generally has been a huge success story for Starbucks, and in Japan two weeks ago it opened its 5,000th store. It will double that number in the next five years (or 2.7 a day for those still counting), meaning it will account for nearly two-thirds of the growth the java slinger is planning on, and more importantly, it says it expects the segment to triple profits.

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During 2014 revenues in the China and Asia-Pacific region hit $1.1 billion on the strength of consistent comparable store sales growth. For 21 straight quarters Starbucks has achieved 5% or better comps as transaction growth, or the average value of what a customer was buying, grew 4%.

And having just acquired the remaining stake in its Japanese business, which is the first country Starbucks expanded into outside of North America in 1996 and is now its second biggest market in terms of retail revenue, Japan will add nearly $1 billion in revenue this year. It was already accretive to its earnings for the first quarter of the current fiscal year.

China represents Starbucks fastest growing market and will be home to the lion's share of its new stores. Photo: Flickr via Dunhilaryu.

A worldwide phenomenon
This global expansion -- with stress being placed on the global portion of it -- is part of Starbucks' larger goal of becoming a $100 billion company, a 36% increase from where it stands today.

A year ago CEO Howard Schultz said it was still early innings in what Starbucks could achieve, but there was no other physical world retailer that could match it's commitment to building a truly trusted and admired global brand. "We're still in the early stages of the growth and development of Starbucks, we're delivering record profits and revenue, sharing our success with our partners and heading toward and past a $100 billion market cap," he said in a statement.

Since Schultz's return to the CEO position in 2008, Starbucks market cap has grown from a low of $5 billion during the depths of the recession to more than $73 billion today, a better than 400% increase, or more than a 56% compounded annual rate of growth. The stock has grown by more than 1,200% since then. It hardly seems a stretch that he will be able to achieve his goal of hitting $100 billion, and doing so sooner rather than later.

Some sour milk in the coffee
Of course some of Schultz's ideas can cause hiccups along the way. For example, his noble goal of enhancing discussion on race relations by having baristas engaged in conversation of the touchy subject with customers was met with widespread skepticism and scorn on social media and was quickly pulled (Schultz says it was always supposed to last for just a week).

He's also publicly addressed topics like same-sex marriage, the ability of gun owners to lawfully carry their firearms in his stores, and congressional gridlock. Schultz seems better when he sticks to his knitting and addresses issues important to shareholders.

The two-for-one stock split Starbucks announced at the annual meeting is a case in point. Under the plan, investors will receive one additional share on April 8 for each share they own. It's the sixth time since going public that Starbucks has split his stock.

As Schultz noted during the annual meeting, a $10,000 investment at the coffee shop's IPO would be worth $1.78 million today.

Increasing the global footprint of Starbucks, even if it means opening a coffee shop inside an existing one, could be the key to seeing such an investment continue its inexorable and exponential growth trajectory.

The article Is There Room for Another 8,000 Starbucks? originally appeared on Fool.com.

Follow Rich Duprey's coverage of all the restaurant industry's most important news and developments. Hehas no position in any stocks mentioned. The Motley Fool recommends Starbucks. The Motley Fool owns shares of Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.