01—Abstract
Summary
Summary of the 10-K filed November 29, 2007. Cited figures are marked; the original filing is the authoritative source.
Starbucks Corporation's 2007 10-K filing reveals a company experiencing robust growth, driven primarily by a significant increase in company-operated retail stores, which now number over 8,500 globally.
Net revenues saw a substantial 21% increase, reaching $9.4 billiona, fueled by both company-operated retail and specialty operations. The international segment showed particularly strong momentum, with a 32% increase in company-operated retail revenue. However, the filing also highlights growing challenges, particularly in the U.S. market, where a flattening transaction count and negative traffic trends were observed, attributed to economic slowdown and price increases.
The company also faced increased operating costs, notably with dairy expenses rising significantly. Despite these headwinds, Starbucks management expressed confidence in its strategy to focus on operational excellence, innovation, and efficiency to navigate the challenging economic environment and achieve targeted growth for fiscal year 2008.
02—Key points
Key Highlights
- Net revenues increased by 21% to $9.4 billion in fiscal year 2007.
- Company-operated retail stores grew by 1,342 to a total of 8,505 globally.
- International segment demonstrated strong growth with a 30% increase in total net revenues.
- U.S. market experienced a 19% increase in net revenues but faced declining transaction trends.
- Operating margin slightly contracted to 11.2% from 11.5% due to higher costs, particularly dairy.
- Net earnings increased by 19% to $673 million, with diluted EPS rising to $0.87.
- Starbucks continued its share repurchase program, repurchasing approximately 12.6 million shares during fiscal year 2007.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2007, Starbucks Corp kept $0.07.
- Revenue$9.41B100.0%
- Cost of revenue−$4.00B42.5%
- Gross profit$5.41B57.5%
- Operating costs−$4.36B46.3%
- Operating income$1.05B11.2%
- Interest, other & tax−$381.3M4.1%
- Net income$672.6M7.1%
Where FY2007 revenue went
$9.41B- Operating costs: $4.36B, 46% of revenue
- Cost of revenue: $4.00B, 42% of revenue
- Net income: $672.6M, 7.1% of revenue
- Interest, other & tax: $381.3M, 4.1% of revenue
Kept 7.1% as net incomeNet income $672.6M · 7.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2007filed November 29, 2007Financial Statements
| Revenue | $9.41B |
| Cost of Revenue | $4.00B |
| Gross Profit | $5.41B |
| Operating Expenses | $8.47B |
| Operating Income | $1.05B |
| Interest Expense | $38.00M |
| Net Income | $672.60M |
| EPS (Basic) | $0.45 |
| EPS (Diluted) | $0.43 |
| Shares Outstanding (Basic) | 1.50B |
| Shares Outstanding (Diluted) | 1.54B |
05—Questions
Frequently Asked Questions
What were the primary drivers of Starbucks' revenue growth in fiscal year 2007?
Starbucks' revenue growth in fiscal year 2007 was primarily driven by the opening of 1,342 new company-operated retail stores and a 5% increase in comparable store sales, which was achieved through a 4% increase in average transaction value and a 1% increase in customer transactions. Growth in specialty operations, including licensing and foodservice, also contributed significantly.
What challenges did Starbucks face in the U.S. market during fiscal year 2007?
In the U.S. market, Starbucks faced challenges including a flattening transaction count and negative traffic trends, which management attributed to the U.S. economic slowdown and two price increases implemented during the year. The company also experienced significant increases in operating costs, particularly for dairy.
How did Starbucks manage its cost pressures?
Starbucks experienced higher costs of sales including occupancy costs due to a shift in sales mix to higher-cost products, increased distribution costs, higher rent, and higher dairy costs. While some of these were offset by leveraging general and administrative expenses and store operating expenses, the overall impact led to a slight contraction in operating margin.
What is Starbucks' outlook for fiscal year 2008?
For fiscal year 2008, Starbucks is targeting opening approximately 2,500 new stores, comparable store sales growth of 3% to 5%, total net revenue growth of 17% to 18% (exceeding $11 billion), and earnings per share between $1.02 to $1.05, representing 17% to 21% growth.
06—Continue