Starbucks Corporation (NASDAQ:SBUX) reported earnings in late January. And they weren’t very impressive.

As a matter of fact, 2017 wasn’t a great year for this massive retail coffee chain.

Now, when you’re a coffee chain with a $78 billion market cap and more than 24,000 stores around the world, a less than stellar year isn’t a reason to panic.

On the contrary, SBUX always finds a way to grow, even if it isn’t the kind of growth analysts hope for.

SBUX has been a publicly traded coffee company since 1992 and it has continued to grow and expand, except for a handful of years around the market crash in 2008.

SBUX Is Slowing Down, Not Stopping

What we see in its recent earnings — and for the whole of 2017 — wasn’t a drop in business, just an unusual slowdown. Where analysts expected 3% same store sales growth, SBUX reported 2%.

But the underlying concern has been that it isn’t new customers that are driving that sales growth, but the same customers that are paying more. SBUX has even introduced mobile ordering and cashless payment systems to speed existing customers through the seemingly ever-present lines for java.

Also, it seems that at the same time SBUX was having trouble bringing more customers in, Americans were eating out more, according to Bloomberg.

SBUX’s explanation for the soft holiday quarter was its specialty holiday drinks and merchandise (gift cards, mugs, etc) didn’t sell as well as in past seasons.

It also may be that the US market is finally maturing and SBUX can’t look to the kind of growth in the US that it has in the past. That may explain why the company is lowering its earnings expectations.

But the future for SBUX isn’t trying to leverage the wallets of US coffee drinkers. Granted, in the US the goal is to bring in customers for more than coffee. It’s looking to expand its lunch and dinner offerings to get some of the market share of post-morning diners.

Beyond that, its big opportunity is in China, where same store sales were up a healthy 6%.

Future Outlook for SBUX

SBUX already has 3000 stores in China and is opening a new store, on average, every 15 hours.

Also given the fact Starbucks has stores in more than 70 countries at this point, a weaker dollar will certainly help that foreign revenue have a bigger impact on the bottom line. And as emerging markets improve, so will the fortunes of SBUX.

SBUX is a long-term growth stock that delivers a respectable 2.1% dividend, which is still giving US inflation a run for its money. That dividend is what makes this a long-term pick, since its value only grows with time.

This is one of those opportunities to get a quality stock that usually trades at a premium, at a good valuation. And given SBUX’s constant efforts to stay relevant and competitive, this is a solid choice for value-focused total return investors.

— Richard Band

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Source: Investor Place