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Krause Fund Research April 19, 2013

Consumer Discretionary
Recommendation: HOLD
Analysts
Thomas Sun thomas-sun@uiowa.edu Kevin Alvarez kevin-alvarez@uiowa.edu Peihong Yu peihong-yu@uiowa.edu Brian Mlot brian-mlot@uiowa.edu

Starbucks Corporation (NASDAQ: SBUX)
Current Price: 58.40 Target Price: $58.33 - $61.10

SBUX Tastes like Decaf
 Strong Earnings Record With 5 year sales growth of 9.6%, Starbucks has continued to demonstrate strong business operations through increasing margins, EPS performance, and high ROE. Average 5-year sales growth of 11.3% should allow Starbucks to continue this trend of strong financial performance.  Commitment to Innovation New products including Verismo, K-cups, VIA, and new menu ii introductions proved to be popular with consumers. Channel development, which contains consumer packaged goods, foodservice, and other is a high margin segment with strong upside potential. However, new products must have the level of success in order to meet revenue forecasts.  Commitment to Expansion Starbucks is committed to broadening its international presence with continued investments in the China/Asia Pacific region. nd China is expected to be Starbucks’ 2 largest market after the 1 U.S. in 2015 . Although, EMEA continues to lag in forecasts, the Company is confident in the region’s long-term success.  Acquisition Activities Recent acquisitions of Evolution Fresh, Tazo, and Teavana should augment the company’s retail strategy if consumer demands for healthier alternatives continue. In addition, Tazo tea products will give the company a more diversified product lineup for serving the China/Asia Pacific region.

Company Overview
Starbucks Corporation is an international retailer of premium coffee and drink products headquartered in Seattle, Washington. Founded in 1971, Starbucks is now the world’s largest coffeehouse company, with over 20,000 stores in 61 i countries . Starbucks is traded on the NASDAQ under the ticker symbol “SBUX”. Starbucks’

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