By Jacob Wolinsky

Bill Ackman‘s presentation slides on Starbucks (SBUX), titled, “Doppio.”

  • Leading global specialty coffee retailer and iconic brand
  • 29,000 stores with over $32 billion in systemwide sales
    • 50% U.S., 50% International
    • 53% Owned (U.S. 60%,China 100%, RoW 30%), 47% Licensed
  • Americas (primarily U.S.) = 67% of EBIT, Asia Pacific = 22%(1)
  • Market capitalization and enterprise valuation of ~$77bn(2)
  • Pershing Square owns 15.2 million shares at an average cost of $51 per share(3)

Long-Term Share Price Outperformance

Startbucks (SBUX) has generated an annualized TSR of 26% over the last ten years, twice the return of the S&P 500 over the same period.


Startbucks (SBUX)

Share Price Down Over the Last 3 Years

SBUX shares are down 6% over the last three years. Including dividends, shareholders have earned a 0% total return, despite EPS growth of ~50%

Startbucks (SBUX)

Current P/E at a Discount to Recent History

SBUX is trading at 22x consensus P/E today, a substantial discount to recent historical averages of ~26x

Startbucks (SBUX)

Investment Highlights

Category killer in away-from-home coffee with leading omnichannel presence

  • Quality and innovation advantage over low-cost coffee and traditional QSR players
  • Convenience, technological and cost advantage over high-end, boutique players

Premium coffee is a secularly growing and attractive category

  • Frequent consumption creates loyal customer base and trade-up potential
  • Aligned with health and wellness and sustainability trends

Attractive unit economics support owned business model in key markets

  • Frequency, price point and high gross margins support profitability
  • Build costs are lower than traditional restaurants due to the absence of kitchens
  • New units in the U.S. generate ~30% cash EBITDA margins and ~65% pretax ROIC; new unit economics in China are even higher
  • China will become an increasingly greater percentage of the total company over time

Long runway for unit growth in the high-single-digits

  • Robust international unit growth led by China as well as other underpenetrated countries
  • Incremental penetration opportunity in the S.

Track record of consistent growth in same-store sales and transactions

  • Long-term average same-store sales (“SSS”) growth of 5% both in the U.S. and globally
  • SSS historically driven ~50% by transactions, ~30% by pricing, and ~20% by mix

Recent acquisitions and divestitures suggest strong focus on core business

  • Acquisition of East China JV and licensing of lower-performing or lower potential markets
  • Sale of CPG business to Nestle for $7.2bn and ongoing royalties
  • Closing of Teavana stores and divestiture of Tazo tea brand to Unilever

Share buybacks of ~$14bn over the next two years (~18% of market cap)

Best-in-Class Unit Economics

Continued store growth in Starbucks’ largest owned markets is supported by industry-leading unit economics


Startbucks (SBUX)

Exceptional Returns on New Unit Capex

We estimate that every dollar Starbucks spends building a new store in the U.S. or China is worth $10 to $15 shortly after the store opens

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