Starbucks to expand to 500 Japan stores
By Neha Kumar
Bloomberg News Service
TOKYO — Starbucks Coffee Japan Ltd., a unit of the largest U.S. specialty-coffee chain, plans to expand to 500 stores by September 2003 to meet demand for its cafe lattes and other products.
AP library photo • January 1998
The company is speeding up its plan to reach the benchmark by six months by focusing on growth in markets outside Tokyo, according to Starbucks Corp. Chairman Howard Schultz.
Starbucks has 368 stores in Japan and is speeding up expansion, with a goal of 500 stores by September 2003.
Starbucks, which opened its first store in Japan in Tokyo's Ginza shopping district in 1996, now has 368 outlets — more than a third of them outside the capital.
"Since we opened ... there was thought from some of the cynics that if Starbucks was going to be successful in Japan, it would only be in Tokyo," Schultz said. "In fact, that's quite wrong."
Starbucks' local unit plans to open 120 outlets in its fiscal year ending next March, Schultz said. It recently opened three stores in Kamakura, Sendai and Osaka.
"When the line gets too long in our stores, it's our responsibility to open up a store nearby — a store to satisfy demand," Schultz said.
Still, some investors are worried about Starbucks' expansion in Japan because the company faces fierce competition from Tully's Coffee Japan Co., a unit of Seattle-based Tully's Coffee Corp., making them skeptical about the company's earnings forecast.
Starbucks Coffee Japan said last month it expects parent net income to increase 29 percent this fiscal year to 950 million yen ($7.92 million) on sales of 62 billion yen, up 30 percent.
"Many of the new Starbucks stores are too close to each other and are taking business away," said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages $600 million. "Also, Tully's is a good competitor."
Starbucks Japan shares have lost more than half their value since the stock debuted in October. Meanwhile, Tully's shares have gained 48 percent since listing last July 26.
Schultz also said Starbucks is planning to expand into Latin America, expecting to open its first store in Mexico by August. The company also plans to open outlets in Greece later this year.
"By the end of 2005, we will have 10,000 stores in close to 60 countries," he said. "Whenever you are growing at this level, there's constant challenge to continue to invest ahead of the growth curve."
Starbucks expects to have 650 stores across Europe by the end of next year, Schultz said at the opening of the chain's Madrid outlet in April. The company may also sell shares in its European unit, he said.
Starbucks in April said worldwide sales this year would increase 22 percent to 24 percent, up from previous projections of 20 percent. It raised its profit estimate to 53 cents to 54 cents a share.
