10-KPeriod: FY2012

STARBUCKS CORP Annual Report, Year Ended Sep 30, 2012

Filed November 16, 2012For Securities:SBUX

Summary

Starbucks Corporation's 2012 10-K filing demonstrates robust financial performance and strategic expansion. The company reported a 13.7% increase in total net revenues to $13.3 billion, driven by a solid 7% growth in global comparable store sales and significant 50% revenue growth in the Channel Development segment, boosted by the successful launch of K-Cup® portion packs. Operating income rose to $2.0 billion, with an improved operating margin of 15.0%, reflecting increased sales leverage which helped offset higher commodity costs. Earnings per diluted share (EPS) also saw a notable increase to $1.79 from $1.62 in the prior year. The company continued its disciplined global store growth, adding a net of 1,063 stores across its segments, with the Americas remaining the largest revenue contributor. The China/Asia Pacific (CAP) segment showed particularly strong revenue growth of 31%, signaling its increasing importance. Starbucks also continued to return value to shareholders through share repurchases and increased dividends, underscoring a commitment to shareholder returns amidst continued investment in store renovations and new product innovation, such as the Verismo™ system.

Financial Highlights

57 data points
Beta

Revenue

$13.28B

56.2% Gross Margin

Net Income

$1.38B

10.4% Net Margin

EPS (Diluted)

$0.90

Total Assets

$8.22B

Cash & Equivalents

$1.19B

Free Cash Flow

$894.10M

Financial Statements
Beta
Revenue$13.28B
Cost of Revenue$5.81B
Gross Profit$7.46B
Operating Expenses$11.49B
Operating Income$2.00B
Interest Expense$32.70M
Net Income$1.38B
EPS (Basic)$0.92
EPS (Diluted)$0.90
Shares Outstanding (Basic)1.51B
Shares Outstanding (Diluted)1.55B

Key Highlights

  • 1Total net revenues increased by 13.7% to $13.3 billion in fiscal 2012.
  • 2Global comparable store sales grew by 7%, with the Americas showing an 8% increase and CAP showing a 15% increase.
  • 3Channel Development segment revenue surged by 50%, largely due to the introduction of K-Cup® portion packs.
  • 4Operating income increased to $2.0 billion, and operating margin improved to 15.0% from 14.8% in fiscal 2011.
  • 5Diluted EPS rose to $1.79, up from $1.62 in fiscal 2011.
  • 6Starbucks repurchased 12.3 million shares and increased its cash dividend, demonstrating a commitment to shareholder returns.
  • 7The company added a net of 1,063 stores globally, expanding its retail footprint.

Frequently Asked Questions

Revenue growth was primarily driven by a 7% increase in global comparable store sales, a 50% revenue increase in the Channel Development segment (bolstered by K-Cup® sales), and a 20% growth in licensed store revenue. New store openings also contributed to the overall revenue increase.

Higher commodity costs, particularly for coffee, negatively impacted operating income by approximately $214 million. However, the company was able to mitigate this impact through increased sales leverage and operational efficiencies, leading to an overall expansion in operating margin.

Starbucks reorganized into four reportable operating segments: Americas, Europe, Middle East, and Africa (EMEA), China/Asia Pacific (CAP), and Channel Development. This alignment with a three-region leadership structure aims to accelerate global growth and improve management's ability to evaluate financial results and make key operating decisions.

Starbucks returned approximately $1.1 billion to shareholders in fiscal 2012 through share repurchases ($593 million) and dividends ($513 million). The company's board authorized an additional 25 million shares for repurchase in November 2012, indicating an ongoing commitment to capital return.

Key risks include sensitivity to customer spending driven by economic conditions, intense competition, reliance on the performance of its Americas segment, potential disruption in the supply chain, increases in commodity costs (especially coffee and dairy), and the importance of brand value and consumer trust. International expansion also carries risks related to foreign currency fluctuations and varying economic and regulatory conditions.