10-KPeriod: FY2009

STARBUCKS CORP Annual Report, Year Ended Sep 27, 2009

Filed November 20, 2009For Securities:SBUX

Summary

Starbucks Corporation's 2009 10-K filing reveals a challenging year marked by significant restructuring efforts and a focus on cost reduction and operational efficiency. The company experienced a revenue decline of 5.9% to $9.77 billion, largely driven by a 6.7% decrease in Company-operated retail revenues due to a 6% decline in comparable store sales in the US and a 2% decline internationally. This period reflects the impact of a difficult economic environment on consumer discretionary spending. Despite revenue headwinds, Starbucks demonstrated a commitment to improving its financial health by executing on its strategic initiatives. The company significantly reduced its cost structure, realizing approximately $580 million in cost reductions through store closures, headcount reductions, and operational efficiencies. These efforts, coupled with a renewed focus on customer experience and product innovation (like the launch of VIA Ready Brew), led to an improvement in operating margin to 5.7% from 4.9% in the prior year. The company also strengthened its financial foundation, ending the year with no short-term debt and substantial cash reserves, positioning it to navigate the ongoing economic challenges and invest in future growth.

Financial Statements
Beta
Revenue$9.77B
Cost of Revenue$4.32B
Gross Profit$5.45B
Operating Expenses$9.33B
Operating Income$562.00M
Interest Expense$39.10M
Net Income$390.80M
EPS (Basic)$0.27
EPS (Diluted)$0.26
Shares Outstanding (Basic)1.48B
Shares Outstanding (Diluted)1.49B

Key Highlights

  • 1Total net revenues decreased by 5.9% to $9.77 billion in fiscal 2009, reflecting a challenging economic environment.
  • 2Company-operated retail revenues declined by 6.7%, primarily due to a 6% decrease in comparable store sales in the US and a 2% decrease internationally.
  • 3Starbucks successfully implemented significant cost reduction initiatives, achieving approximately $580 million in savings through store rationalization, workforce adjustments, and operational efficiencies.
  • 4Operating income increased by 11.5% to $562.0 million, and the operating margin improved to 5.7% from 4.9% in the prior year, driven by cost efficiencies.
  • 5Earnings Per Share (EPS) diluted increased to $0.52 in fiscal 2009 from $0.43 in fiscal 2008.
  • 6The company reduced its short-term borrowings to zero by the end of fiscal 2009, ending the year with over $650 million in cash and liquid investments.
  • 7Starbucks continued its global expansion, albeit at a slower pace, with a net decrease of 385 Company-operated stores but a net increase of 89 internationally, and a net increase of 305 licensed stores internationally.

Frequently Asked Questions

The main drivers were the challenging economic environment impacting consumer discretionary spending, leading to decreased comparable store sales, and the company's strategic response through significant cost reduction initiatives and operational efficiencies. The company also launched new products like VIA Ready Brew.

Starbucks implemented a comprehensive restructuring plan that included closing approximately 1,000 Company-operated stores globally, reducing headcount in its support organization, and improving in-store operational efficiencies. These measures helped reduce costs and improve operating margins, allowing for profitability despite lower revenue.

The company projected revenue growth in the low-to-mid single digits, driven by modestly positive comparable store sales, a 53rd fiscal week, and approximately 300 net new store openings (primarily licensed stores). Starbucks also expected a significant improvement in its consolidated operating margin due to its reduced cost structure and operational efficiencies.

Starbucks maintained a strong financial position, ending fiscal 2009 with no short-term debt outstanding and over $650 million in cash and liquid investments. Cash flow from operations was robust, enabling the company to reduce borrowings and fund ongoing business investments.