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Rambler Investment Fund | By Kyle Kauss Page 1 Starbucks Corporation (SBUX) Consumer Discretionary Sector | Restaurant Industry As of 11/29/2015 Recommendation: BUY Current Price: $57.60 Target Price: $66.50 Investment Thesis We initiate a BUY recommendation on Starbucks Corporation (SBUX) with a price target of $66.50 by applying an approximate 35x P/E to our FY16 EPS estimate. This offers a 13.4% upside from its closing price of $57.60 on 3/8/2016. SBUX is able to capitalize on its core beverage business through solid same-store sales growth and strong operating cash flows. This positions SBUX to invest in their rapidly growing markets in China and Japan in addition to digital technology to increase convenience and customer satisfaction. Core Business i In Q1 FY16, the company served over 23 million more customer occasions from its global comp store base, 18 million of them in the U.S. These results reflect the continuing pattern of accelerating growth momentum seen in the core operating business with each quarter of 2015. Same-Store Sales Growth and Strong Operating Cash Flows ii Consolidated net revenues were $5.4 billion in Q1 FY16, an increase of 12% over Q1 FY15. The increase was primarily driven by an 8% increase in global comparable store sales and the opening of 1,693 net new stores over the past 12 months. Consolidated operating income grew 16% to $1,058 million in Q1 FY16, up from $915.5 million in Q1 FY15. Consolidated operating margin expanded 60 basis points to 19.7%. The increase was primarily due to sales leverage and was partially offset by investments in their employees and digital platforms. Multiple Growth Strategies SBUX has seven growth strategies that it plans to capitalize on over the next several years, including growing the store portfolio and extending digital engagement. SBUX plans to increase the size of their store footprint with disciplined expansion into China and Asia Pacific, which is the fastest growing region, as well as Japan and India. In an attempt to extend digital engagement SBUX is driving convenience and brand engagement through mobile commerce platforms. Market Profile Closing Price $57.60 Exchange NASDAQ Market Cap $85,375 Mil Shares Outstanding 1,478 Mil 52-Week Range $64 - $42.05 P/E 35.5 P/B 14.3 P/S 4.4 P/FCF 32.9 Dividend Yield 1.40% Beta 0.94 $40 $45 $50 $55 $60 $65 Figure 1. One Year Price Movement Source: Bloomberg

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Rambler Investment Fund | By Kyle Kauss Page 1

Starbucks Corporation (SBUX) Consumer Discretionary Sector | Restaurant Industry As of 11/29/2015

Recommendation: BUY Current Price: $57.60 Target Price: $66.50

Investment Thesis We initiate a BUY recommendation on Starbucks Corporation (SBUX) with a price target of $66.50 by applying an approximate 35x P/E to our FY16 EPS estimate. This offers a 13.4% upside from its closing price of $57.60 on 3/8/2016. SBUX is able to capitalize on its core beverage business through solid same-store sales growth and strong operating cash flows. This positions SBUX to invest in their rapidly growing markets in China and Japan in addition to digital technology to increase convenience and customer satisfaction. Core Businessi In Q1 FY16, the company served over 23 million more customer occasions from its global comp store base, 18 million of them in the U.S. These results reflect the continuing pattern of accelerating growth momentum seen in the core operating business with each quarter of 2015. Same-Store Sales Growth and Strong Operating Cash Flowsii Consolidated net revenues were $5.4 billion in Q1 FY16, an increase of 12% over Q1 FY15. The increase was primarily driven by an 8% increase in global comparable store sales and the opening of 1,693 net new stores over the past 12 months. Consolidated operating income grew 16% to $1,058 million in Q1 FY16, up from $915.5 million in Q1 FY15. Consolidated operating margin expanded 60 basis points to 19.7%. The increase was primarily due to sales leverage and was partially offset by investments in their employees and digital platforms.

Multiple Growth Strategies SBUX has seven growth strategies that it plans to capitalize on over the next several years, including growing the store portfolio and extending digital engagement. SBUX plans to increase the size of their store footprint with disciplined expansion into China and Asia Pacific, which is the fastest growing region, as well as Japan and India. In an attempt to extend digital engagement SBUX is driving convenience and brand engagement through mobile commerce platforms.

Market Profile

Closing Price $57.60

Exchange NASDAQ

Market Cap $85,375 Mil

Shares Outstanding

1,478 Mil

52-Week Range

$64 - $42.05

P/E 35.5 P/B 14.3 P/S 4.4 P/FCF 32.9 Dividend Yield

1.40%

Beta 0.94

Source: Bloomberg

$40

$45

$50

$55

$60

$65

Figure 1. One Year Price Movement

Source: Bloomberg

Rambler Investment Fund | By Kyle Kauss Page 2

Business Description Starbucks Corporation (SBUX) is the premier roaster, marketer and retailer of specialty coffee in the world, operating in 65 countries. They purchase and roast high-quality coffees that they sell, along with handcrafted coffee, tea and other beverages and a variety of fresh food items, through company-operated stores. They also sell a variety of coffee and tea products and license their trademarks through other channels such as licensed stores, grocery and national foodservice accounts. In addition to their flagship Starbucks Coffee brand, they also sell goods and services under the following brands: Teavana, Tazo, Seattle’s Best Coffee, Evolution Fresh, La Boulange and Ethos.

Revenue from company-operated stores accounted for 78% of total net revenue during Q1 FY16, while revenue from licensed stores accounted for 10% of total net revenue during Q1 FY16. iii Licensed stores generally have a higher operating margin than company-operated stores. Under the licensed model, Starbucks receives a reduced share of the total store revenues, but this is more than offset by the reduction in its share of costs as these are primarily incurred by the licensee.iv

Over the next five years, the company expects to grow to nearly $30 billion in annual revenue, 30,000+ stores globally, and two times their current annual operating income through diversified revenue growth. v Some fiscal 2016 targets include adding approximately 1,800 net new store openings and global comparable store sales growth in the mid to high single digits.vi

Segments The company has four reportable operating segments: Americas, which is inclusive of the US, Canada, and Latin America; Europe, Middle East, and Africa ("EMEA"); China/Asia Pacific ("CAP"); and Channel Development. They also have several non-reportable operating segments, including Teavana, Seattle's Best Coffee, Evolution Fresh, and their Digital Ventures business, which are combined and referred to as Other Segments.vii

Their Americas, EMEA, and CAP segments include both company-operated and licensed stores. Certain markets within their EMEA and CAP operations are still in the early stages of development and require a more extensive support organization, relative to their current levels of revenue and operating income, than their Americas operations. In certain markets within EMEA and CAP, occupancy costs and store operating expenses can be higher than in the Americas segment due to higher rents for prime store locations or costs of compliance with country-specific regulatory requirements.viii

Retail Sales Americas, EMEA and CAP operations sell coffee and other beverages, food, packaged coffees, single-serve coffee products and a focused selection of merchandise through company-operated stores and licensed stores.ix The company’s Americas segment is their most mature business and has achieved significant scale.

Strategies The company’s strategy for expanding their global retail business is to increase their market share in a disciplined manner, by selectively opening additional stores in new and existing markets, as well as increasing sales in existing stores, to support their long-term strategic objective to maintain Starbucks standing as one of the most recognized and respected brands in the world.x The company will continue to extend digital engagement by driving convenience and brand engagement through mobile commerce and platforms. Additionally, the company wants to create a second major business in tea by building the Teavana brand.

Rambler Investment Fund | By Kyle Kauss Page 3

Industry Overview and Competitive Positioning Strong U.S. Consumer The stronger the consumer is, the better the restaurant industry will do. In the U.S. the consumer is exceptionally strong as unemployment is at historic lows and real disposable personal income is growing above 2% YoY. Confidence is also remaining strong despite of the recent financial market turmoil as wages grow and more people get jobs. This is a positive for the restaurant industry, specifically fast-casual, as meals eat away less of the consumer’s income. Although there is usually a Starbucks at every other corner, the company has not seen any signs of cannibalization or market saturation, which bodes well for the company as they continue to open more stores in the U.S., home of the strongest consumer, which is their largest operating segment. Market Share The top ten companies in the Ready-To-Drink (RTD) Coffee industry made up 69.3% of the industry by volume in 2015, 7% of which was held by SBUX.xi The company has consistently gained market share since 2005. Additionally, SBUX makes up 2.5% of the top ten companies, which is 52.6% of total volume, in the Coffee industry based on retail value.xii We expect the company to gain more market share in each of these industries as a result of Channel Development and globalization in addition to the fact that SBUX does not directly compete many of the large players in the industry. Although they may begin facing competition in its Channel Development segment as the company introduces new products, such as K-Cups, SBUX is the only pure coffee shop in the industry and faces very little direct competition on a global scale.

Competitive Advantages Pricing Power Advantages The company brand evokes a high-quality customer experience that allows them to enjoy pricing power advantages over competitors. The expansion of the Starbucks Reserve Brand is an example of the company elevating the premium quality coffee experience that they deliver to their customers.xiii In addition to their reputation for quality, their globally recognized brand provides them with the opportunity to apply their competitive advantages to international markets, which may serve as a critical growth factor in the future.

Same-Store Sales Growth via Digital Innovations Restaurants are attempting to increase traffic and sales by using technology and digital innovations to improve customer experience in hopes of driving up comp sales and ticket sizes in hopes of offsetting rising labor expenses. The restaurant industry is up almost 1% this year, outpacing the S%P 500, which has declined over 3% over the same period. Top performing stocks like SBUX are increasing comp sales and traffic by investing in digital platforms that include mobile ordering and payments as well as loyalty programs. The company’s My Starbucks Rewards loyalty program increased 23% in Q1 FY16 and now has more than 11 million active members in the U.S.xiv

Majority of Revenue is from US Approximately 69% of Starbucks’s Q1 FY16 revenue is from the Americas, which means that barely 30% of the company’s revenue is subject to foreign exchange fluctuations. Additionally, Starbucks saw 9% Q1 FY16 sales growth in the Americas.

14.3

11.5 11.3

7.4 7 64.6

3.1 2.3 1.9

0

5

10

15

20Top 10 RTD Coffee Companies

22.7

12.2

3 2.9 2.8 2.5 2 1.8 1.4 1.4

0

5

10

15

20

25Top 10 Coffee Companies by Retail Value

4

5

6

7

8

9

10

11

Jan

-07

May

-08

Sep

-09

Jan

-11

May

-12

Sep

-13

Jan

-15

Per

cen

t

Unemployment Rate

-6

-4

-2

0

2

4

6

8

Jan

-10

No

v-1

0

Sep

-11

Jul-

12

May

-13

Mar

-14

Jan

-15

No

v-1

5

Per

cen

t C

hg.

Fro

m Y

ear

Ago

Real Disposable Personal Income

Source: US. Bureau of Economic Analysis/FRED

Source: US. Bureau of Labor Statistics/FRED

Rambler Investment Fund | By Kyle Kauss Page 4

Investment Summary We initiate a BUY recommendation on Starbucks Corporation (SBUX) with a price target of $66.50. This offers a 13.4% upside from its closing price of $57.60 on 3/8/2016. We believe the company offers both short term and long term value as it further develops its mobile platforms and Channel Development. Although there is a reasonable amount of upside potential, we recommend starting a position in SBUX the next time there is a market selloff, specifically when the price of the stock drops below $60 (~33x P/E FY2015 earnings).

Short Term | Q4 Results Reflects Continuing Growth Momentumxv Revenue in Q1 jumped 11.6% to $4.2 billion with operating income up 15.6% to $1,058 million ending the quarter. Overall, global comp store sales and traffic increased 8% and 4%, respectively, driven by a combination of strong international unit growth and new product innovation. The strong growth in in customer visits is prompted by occasion innovation (capturing more than morning coffee traffic) and mobile payments in the U.S, which has shown significant growth during this quarter.

Long Term | A Large Business That Still Has Room to Grow We believe SBUX is a good long-term investment as a result of its addictive product and strong brand loyalty. Additionally, the company has seen positive results from its Channel Development segment, which grew 16% over Q1 FY14, primarily driven by increased sales of packaged coffee and premium single-serve products. This is evident as the Starbucks Single Cup product passed the Keurig Green Mountain Single Cup in total dollar market share in October, which is third overall behind Folgers and Maxwell House.xvi We see additional growth potential as SBUX continues to create new occasions by growing store usage throughout the entire day with new product offerings through Channel Development and strategic acquisitions. Technological innovations will continue to drive convenience, which leads to more orders per customer. As a result of the acquisition of Starbucks Japan and other initiatives to grow the store portfolio, an increase in the company’s geographic footprint opens the door for more growth. This is a large, successful business that still has room to grow.

Valuation Our price target of $66 is derived by applying an approximate 35x P/E to our fiscal 2016 EPS estimate of $1.90. It is worth noting that the Restaurant industry multiples are in the 28x-29x range on 2016 estimates.xvii Over the last five years the average P/E of SBUX has been approximately 33 and has been on an upward trend since the recovery (see appendix 3).Although the company trades at a higher P/E than the industry average, SBUX has a PEG ratio of 1.8, which below the industry average of 2.5 (see appendix 4). We believe the higher valuation of SBUX is warranted because of its superior growth potential compared to the rest of its peers and the attractive domestic macroeconomic backdrop in regards to the consumer.

Price Target

Closing Price $57.60

Target Price $66.50

Upside 13.4%

Source: Team Estimates

Q1 FY16 Growth Rates

Same-Store Sales

Americas 9%

CAP 5%

EMEA 1%

Traffic Increase

Americas 4% CAP 4% EMEA 1%

Source: Company Data

Rambler Investment Fund | By Kyle Kauss Page 5

Price Objective Basis We are forecasting FY2016 EPS of $1.90, which is slightly above the company’s guidance of $1.87-$1.89.

Revenue growth – Revenue was forecasted per operating segment: company-operated stores, licensed stores, and CPG, foodservice and other. The growth was forecasted using revenue per store after estimating the future number of stores based on company guidance and team estimates.

Store operating expenses – Store operating expenses were forecasted based on company guidance, which was in-line with historical averages and team estimates.

Taxes – Taxes were computed using the relevant national tax rates in addition to company guidance.

Operating income and margin – Operating income was forecasted with the assumption that SBUX’s margin will continue to expand as they introduce new stores that are mainly licensed, which have a lower margin than company-operated stores. Additionally, we believe the lower price of coffee will incrementally reduce the company’s cost of sales as a percentage of revenue, further increasing their operating margin.

Number of shares outstanding – We derived the number of diluted shares based on the company’s announcement of repurchasing 50 million shares of common stock in addition to 11 million shares that they still plan on repurchasing.xviii

Financial Analysis

Increasing Revenue supported by Solid Operations SBUX has seen a CAGR of 13% in consolidated revenues from FY2012 to FY2015. We believe this comes as a result of increasing growth in comp sales, transactions, and tickets, which grew 8%, 4%, and 4%, respectively, in Q1 FY16.xix As a result, earnings per store has increased 10% YoY in FY2015 and we expect this trend to continue into the next couple of years (see appendix 2). In addition to growing comp sales, ~1,800 new stores opening in FY2016, a majority of which will be low margined licensed stores, is very attractive to us as we believe this will allow the company to grow profits at a higher rate than their competitors over the coming years.

Flexibility in Financing New Ventures SBUX has the option to finance its new ventures with internally generated funds or borrowings. The company has paid a total of $2 billion dollars in acquisitions, almost all of which has been paid in cash. xx As a result of the purchase of Starbucks Japan the company’s financial statements show weaker liquidity ratios than usual. The company has a $750 million line of credit available, which they did not draw from in FY2015, in addition to a total debt to equity ratio of 40.3 consisting of only long term debt. SBUX’s extra capacity for debt positions it well to finance future growth opportunities. Consistent Cash Flows Ex-Litigation Expenses Net income has consistently grown ex-litigation expense incurred in FY2013 and as a result SBUX has been able to continuously repurchase stock and payout dividends. They

Revenue and Earnings Data

Revenue (Millions $) 1Q 2Q 3Q 4Q Total 2015 4,803 4,563 4,881 4,914 19,163 2014 4,239 3,873 4,153 4,180 16,447 2013 3,793 3,549 3,735 3,788 14,866

Earnings Per Share ($) 2015 0.65 0.33 0.41 0.43 1.82 2014 0.36 0.28 0.34 0.39 1.36 2013 0.28 0.26 0.28 -0.82 0.01

Profitability

Returns % ROE 41.9 ROA 19.5 ROIC 29.7

Margins % Gross 59.3 EBITDA 24.3 Operating 19.7 Net 12.8

Liquidity

Ratios Cash 0.5 Quick 0.7 Current 1.1

Debt Ratios D/Equity 39.2 D/Capital 28.2 D/Assets 18.1

Source: Company Data

13.314.9

16.4

19.2

0

5

10

15

20

25

FY12 FY13 FY14 FY15

Consolidated Revenue (in billions)Source: Company Data

Source: Company Data

Rambler Investment Fund | By Kyle Kauss Page 6

currently payout nearly 37% of net income as dividends, which we believe will increase incrementally over the years as the company continues to mature. This is evident as the company’s Board of Directors approved a 25% increase in the quarterly dividend to $0.20 per share in Q4 FY15.xxi Optimistic Outlook for SBUX’s Core Business SBUX’s increasing number of stores will contribute to significant returns to its investment. With SBUX’s current expansion through local and foreign demographics, we forecast the contribution of the new stores to add ~$3 million to consolidated revenue. We are also forecasting that this number will grow by about 7% per year as a result of mobile platform innovation increasing conveniency.

Investment Risks Market Risk | Unfavorable Market Conditions Result in Lower Consumer Spending As a retailer that is dependent upon consumer discretionary spending, SBUX’s results of operations are sensitive to changes in macroeconomic conditions. Customers may have less money for discretionary purchases and may stop or reduce their purchases of the company’s products or trade down to competitors' lower priced products as a result of job losses, higher interest rates, and reduced access to credit. Operational Risk | Adverse Public Opinions Due to Health Concerns Reports, whether true or not, of food-safety issues, such as food-borne illnesses, food tampering, food contamination or mislabeling, in the past severely injured the reputations of companies in the food processing, grocery and quick-service restaurant industries and could affect SBUX as well. Because of its globally renowned brand, any tarnish to SBUX’s reputation will significantly affect store traffic and sales. Operational Risk | Heavy Reliance on Digital and Information Technology SBUX relies heavily on information technology in their operations, and any interruption or security failure of that technology could harm their ability to effectively operate their business and could adversely affect their financial results. Technological platforms and applications are now an integral part of SBUX’s business model and any technological issues will negatively affect the company’s business. Additionally, there is the possibility that a lack of progress on the mobile order and pay initiative could lead to a lower valuation.

Geographic Risks | High Dependency on Americas Operating Segment SBUX’s financial performance is highly dependent on their Americas operating segment, as it comprised of approximately 69% of consolidated total net revenues in fiscal 2015. If the Americas operating segment revenue trends slow or decline, then their other segments may be unable to make up any significant shortfall.

Disclaimer: The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any individual affiliated with the Rambler Investment Fund, Quinlan School of Business, or Loyola University of Chicago with regard to this company’s stock.

1,3831,677

1,985

2,497

0

500

1,000

1,500

2,000

2,500

3,000

FY12 FY13 FY14 FY15

Adjusted Net Income (in billions)

Source: Bloomberg Source: Bloomberg

Source: Company Data

Rambler Investment Fund | By Kyle Kauss Page 7

Appendix 1: Income Statement for Starbucks

INCOME STATEMENT

Fiscal year 2013A 2014A 2015A 2016F 2017F 2018F

Fiscal year end date 9/29/13 9/28/14 9/29/15 9/30/16 9/30/17 9/30/18

Revenues:

Company-operated 11,793.2 12,977.9 15,197.3 17,017.6 19,001.7 21,162.5

YoY growth - 10.0% 17.1% 12.0% 11.7% 11.4%

Specialty Sales

Licensing 1,360.5 1,588.6 1,861.9 2,381.6 3,020.0 3,801.7

CPG, foodservice and other 1,713.1 1,881.3 2,103.5 2,355.9 2,638.6 2,955.3

Total Specialty 3,073.6 3,469.9 3,965.4 4,737.5 5,658.6 6,756.9

YoY growth - 12.9% 14.3% 19.5% 19.4% 19.4%

Net Revenues 14,866.8 16,447.8 19,162.7 21,755.2 24,660.3 27,919.5

YoY growth - - 16.5% 13.5% 13.4% 13.2%

Expenses:

Cost of sales including occupancy costs 6,382.3 6,858.8 7,787.5 8,810.8 9,938.1 11,195.7

As a % of revenue 42.9% 41.7% 40.6% 40.5% 40.3% 40.1%

Gross Income 8,484.5 9,589.0 11,375.2 12,944.3 14,722.2 16,723.8

As a % of revenue 57.1% 58.3% 59.4% 59.5% 59.7% 59.9%

Store operating expenses 4,286.1 4,638.2 5,411.1 5,956.2 6,650.6 7,406.9

As a % of retail sales 36.3% 35.7% 35.6% 35.0% 35.0% 35.0%

Other operating expenses 431.8 457.3 522.4 615.9 735.6 878.4

As a % of specialty sales 14.0% 13.2% 13.2% 13.0% 13.0% 13.0%

Depreciation and Amortization expenses 621.4 709.6 893.9 979.0 1,109.7 1,256.4

As a % of revenue 4.2% 4.3% 4.7% 4.5% 4.5% 4.5%

General and administrative expenses 937.9 991.3 1,196.7 1,305.3 1,479.6 1,675.2

As a % of revenue 6.3% 6.0% 6.2% 6.0% 6.0% 6.0%

Litigation credit 2,784.1 (20.0) 0.0 0.0 0.0 0.0

Total operating expenses 15,443.6 13,635.2 15,811.6 17,667.2 19,913.6 22,412.5

Income from equity investees 251.4 268.3 249.9 249.9 249.9 249.9

Operating income (325.4) 3,080.9 3,601.0 4,337.9 4,996.6 5,756.8

YoY growth (10.5) 16.9% 20.5% 15.2% 15.2%

Operating margin -2.2% 18.7% 18.8% 19.9% 20.3% 20.6%

Gain resulting from acquisition of joint venture 0.0 390.6 0.0 0.0 0.0

Loss on extinguishment of debt 0.0 (61.1) 0.0 0.0 0.0

Interest income and other, net 123.6 142.7 43.0 50.0 50.0 50.0

Interest expense (28.1) (64.1) (70.5) (70.5) (70.5) (70.5)

EBIT (229.9) 3,159.5 3,903.0 4,317.4 4,976.1 5,736.3

Income taxes (238.7) 1,092.0 1,143.7 1,489.5 1,716.7 1,979.0

Tax rate 103.8% 34.6% 29.3% 34.5% 34.5% 34.5%

Net earnings including noncontrolling interests 8.8 2,067.5 2,759.3 2,827.9 3,259.3 3,757.3

Net earnings/(loss) attributable to noncontrolling interests 0.5 (0.4) 1.9 0.0 0.0 0.0

Net income 9.3 2,067.1 2,761.2 2,827.9 3,259.3 3,757.3

YoY growth - 22127% 34% 2% 15% 15%

Weighted average shares outstanding - diluted 1,524.6 1,526.3 1,513.4 1,490.0 1,467.0 1,445.0

Earnings per share - diluted 0.01 1.35 1.82 1.90 2.22 2.60

Yoy growth 22102.1% 34.7% 4.0% 17.1% 17.0%

Rambler Investment Fund | By Kyle Kauss Page 8

Appendix 2: Segment Analysis for Starbucks

SEGMENTS

Fiscal year 2013A 2014A 2015A 2016F 2017F 2018F

Fiscal year end date 9/29/2013 9/28/2014 9/29/2015 9/30/16 9/30/17 9/30/18

Stores Open

Company-Operated

Americas 8,078 8,395 8,671 9,021 9,371 9,721

CAP 882 1,132 2,452 2,752 3,052 3,352

EMEA 826 817 737 777 817 857

Other Segments 357 369 375 375 375 375

Total Company-Operated 10,143 10,713 12,235 12,925 13,615 14,305

Licensed

Americas 5,414 5,796 6,132 6,482 6,832 7,182

CAP 3,000 3,492 3,010 3,610 4,210 4,810

EMEA 1,143 1,323 1,625 1,785 1,945 2,105

Other Segments 66 42 41 41 41 41

Total Licensed 9,623 10,653 10,808 11,918 13,028 14,138

Total Stores Open 19,766 21,366 23,043 24,843 26,643 28,443

Revenues

Company-operated stores 11,793 12,978 15,197 17,018 19,002 21,163

Revenue per Company-operated store 1.16 1.21 1.24 1.32 1.40 1.48

YoY growth 4.2% 2.5% 6.0% 6.0% 6.0%

Lisenced stores 1,361 1,589 1,862 2,382 3,020 3,802

Revenue per Licensed store 0.14 0.15 0.17 0.20 0.23 0.27

YoY growth 5.5% 15.5% 16.0% 16.0% 16.0%

CPG, foodservice and other 1,713 1,881 2,104 2,356 2,639 2,955

YoY growth 9.8% 11.8% 12.0% 12.0% 12.0%

Total Revenue 14,868 16,449 19,164 21,757 24,662 27,921

Revenue per store 2.75 2.84 3.13 3.36 3.61 3.89

YoY growth 3.3% 10.1% 7.4% 7.5% 7.7%

Rambler Investment Fund | By Kyle Kauss Page 9

Appendix 3: P/E Analysis

Rambler Investment Fund | By Kyle Kauss Page 10

Appendix 4: PEG Ratio Comparison

PEER PEG RATIOS

Average 1.99

STARBUCKS CORP 1.81

PANERA BREAD COMPANY-CLASS A 1.89

KRISPY KREME DOUGHNUTS INC 0.94

DUNKIN' BRANDS GROUP INC 1.56

DOMINO'S PIZZA INC 2.17

PAPA JOHN'S INTL INC 1.58

MCDONALD'S CORP 2.78

YUM! BRANDS INC 2.01

CHIPOTLE MEXICAN GRILL INC 1.53

WENDY'S CO/THE 5.86

JACK IN THE BOX INC 1.44

SHAKE SHACK INC - CLASS A 4.42

POPEYES LOUISIANA KITCHEN IN 1.80

POTBELLY CORP 2.19

NOODLES & CO N/A

PAPA MURPHY'S HOLDINGS INC 1.83

SONIC CORP 1.32

RESTAURANT BRANDS INTERN 1.84

CRACKER BARREL OLD COUNTRY 2.00

BOB EVANS FARMS 1.90

DARDEN RESTAURANTS INC 1.37

BUFFALO WILD WINGS INC 1.59

BRINKER INTERNATIONAL INC 1.00

TEXAS ROADHOUSE INC 2.03

BLOOMIN' BRANDS INC 0.95

DINEEQUITY INC N/A

Rambler Investment Fund | By Kyle Kauss Page 11

Appendix 5: Dividend Analysis

Rambler Investment Fund | By Kyle Kauss Page 12

Appendix 6: Sources

i Q1 FY16 Earnings Release ii Q1 FY16 Earnings Release iii Bloomberg iv 2014 10-K v 2014 Investor’s day Strategic Overview Presentation vi 2015 Q4 Earnings Release vii 2014 10-K viii 2014 10-K ix 2014 10-K x 2014 10-K xi Bloomberg Intelligence xii Ibid. xiii Ibid. xiv Q1 FY16 Earnings Release xv 2015 Earnings Release xvi Bloomberg IRI Data xvii Bloomberg data on Restaurant industry xviii https://news.starbucks.com/news/starbucks-share-repurchase-authorization xix Morgan Stanley Global Consumer and Retail Conference xx Bloomberg company M&A data xxi 2015 Q4 Earnings Release