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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Investors should perk up and look at Starbucks

Starbucks plans to grow to 55,000 stores by 2030.  (Ramin Talaie/Bloomberg)

Starbucks (Nasdaq: SBUX) has been through major challenges in recent years, including store closures during the pandemic and rising supply chain costs from inflation.

It’s now experiencing strong traffic at its stores, with its fiscal third-quarter earnings report showing a 12% year-over-year increase in revenue. That’s an impressive growth rate for a business with $35 billion in annual revenue.

A company that can post double-digit growth rates after establishing more than 37,000 stores worldwide is worth considering for your long-term portfolio.

That kind of growth reflects a management that’s still finding ways to improve the customer experience, including improvements to digital ordering as well as new menu items that drive more store traffic.

Although it seems to have already placed a Starbucks on every corner, management aims to have 55,000 stores by 2030.

That’s annualized growth in the store base of almost 6% per year.

Last quarter the company reported a 10% increase in sales at stores open at least a year – thanks, in part, to investments in new espresso machines and warming ovens, and greater store efficiency overall.

Management believes it can grow earnings between 15% and 20% annually through fiscal 2025.

Starbucks has strengthened the culture of coffee in the U.S., and it’s looking to grow its business in noncoffee cultures such as China, too. (The Motley Fool owns shares of and has recommended Starbucks.)

Ask the Fool

Q. What’s a “meme stock”? – G.L., Taos, New Mexico

A. A meme stock is one that becomes very popular via social media, sending the share price up. As any stock becomes popular, investors typically will buy lots of shares.

Once enthusiasm wanes, or other meme stocks become more popular, many might sell their shares, sending them spiraling downward.

Some classic meme stocks have included GameStop and AMC Entertainment Holdings.

Though not actually a stock, the cryptocurrency Dogecoin was pumped up like one.

Rivian Automotive, a maker of electric SUVs and trucks, and SoFi Technologies, a financial services company, are more recent examples of meme stocks.

Meme stocks aren’t necessarily tied to bad companies, but they are often risky due to their enhanced volatility.

Never jump into any stock just because everyone’s talking about it – always do your own research.

If you buy it, make sure that it’s attractively priced and not pushed up into overvalued territory.

Q. You recently explained what a golden parachute is. What are “golden handcuffs”? – H.S., Hinsdale, Illinois

A. In the business world, golden handcuffs are financial incentives that are designed to keep key employees or executive managers sticking around.

They can include flexible working schedules, stock options, attractive benefits, pensions and bonuses.

They might even include a company car or payments toward tuition or student loans.

Many of these benefits are deferred. For example, your company might grant you stock options that vest (become fully available to you) over several years, so if you want to be able to cash in on all the options, you’ll need to stick around until they all vest.

Other benefits might require repayment if you leave within a certain period.

My Dumbest Investment

My most regrettable investment was in the National Bank of Greece, where I lost the bulk of my investment. The bank ended up defaulting on debts. – A.S., online

The Fool responds: You weren’t alone betting on Greece and losing.

Many big investors (including major American hedge funds) plowed billions of euros into the country’s banking system, only to lose much of their money. In fact, they did so repeatedly.

Their mistake was, to some degree, one that small investors often make, too – the stocks simply looked too cheap to fail.

Some Greek banks were trading for a fraction of their tangible book value, seeming quite undervalued.

Plenty of investors thought that once Greece’s economy recovered from a prolonged recession following the financial crisis of 2008, so would the fortunes of its banks.

Greece’s problems lasted longer than many expected, though, and its banking system ended up getting bailed out multiple times.

By late 2015, the National Bank of Greece was being delisted from the New York Stock Exchange after shares had plunged more than 90%.

The lesson here? With foreign companies, research the countries they’re based in as carefully as the stocks you’re thinking of buying.

It would also be smart to learn more about the industry. Banking, for example, is more complex than it may seem.