01—Abstract
Summary
Summary of the 10-K filed November 14, 2014. Cited figures are marked; the original filing is the authoritative source.
Starbucks Corporation's fiscal year 2014 filing demonstrates a significant financial recovery and growth trajectory, primarily driven by an 11% increase in total net revenues to $16.4 billiona.
This growth was fueled by robust comparable store sales of 6% across its global segments, a testament to effective strategies in product innovation and store expansion. The company successfully navigated the aftermath of the Kraft litigation, as evidenced by a substantial swing from an operating loss in fiscal 2013 to a healthy operating income of $3.1 billionb in fiscal 2014, with an operating margin improving to 18.7%. This financial turnaround was aided by operational efficiencies, favorable commodity costs (particularly coffee), and strategic sales leverage.
Looking ahead, Starbucks outlined an ambitious growth plan for fiscal 2015, projecting revenue growth of 16-18%, including contributions from the acquisition of Starbucks Japan. The company's commitment to returning value to shareholders is also evident, with $1.6 billionc returned in fiscal 2014 through dividends and share repurchases, signaling confidence in its financial health and future prospects. Despite ongoing risks related to economic conditions and competition, Starbucks' strategic focus on disciplined global expansion, brand value, and operational excellence positions it for continued success.
02—Key points
Key Highlights
- Total net revenues increased 11% to $16.4 billion in fiscal 2014, up from $14.9 billion in fiscal 2013.
- Global comparable store sales grew by 6%, with a 3% increase in transactions and a 3% increase in average ticket.
- Operating income saw a significant improvement, turning from a $325.4 million loss in fiscal 2013 to a $3.1 billion profit in fiscal 2014.
- Operating margin expanded to 18.7% in fiscal 2014, up from -2.2% in fiscal 2013, largely due to lapping the Kraft litigation charge and improved sales leverage.
- Earnings per share (diluted) increased to $2.71 from $0.01 in the prior year, also significantly influenced by the absence of the Kraft litigation charge.
- The company returned $1.6 billion to shareholders in fiscal 2014 through dividends and share repurchases.
- Significant store growth continued, with a net increase of 1,599 company-operated and licensed stores globally, bringing the total to 21,366.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, Starbucks Corp kept $0.13.
- Revenue$16.45B100.0%
- Cost of revenue−$6.86B41.7%
- Gross profit$9.59B58.3%
- Operating costs−$6.51B39.6%
- Operating income$3.08B18.7%
- Interest, other & tax−$1.01B6.2%
- Net income$2.07B12.6%
Where FY2014 revenue went
$16.45B- Cost of revenue: $6.86B, 42% of revenue
- Operating costs: $6.51B, 40% of revenue
- Net income: $2.07B, 13% of revenue
- Interest, other & tax: $1.01B, 6.2% of revenue
Kept 13% as net incomeNet income $2.07B · 13%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed November 14, 2014Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $16.45B$14.87B | +10.6% |
| Cost of Revenue | $6.86B$6.38B | +7.5% |
| Gross Profit | $9.59B$8.48B | +13.0% |
| Operating Expenses | $13.63B$15.44B | −11.7% |
| Operating Income | $3.08B-$325.40M | +1046.9% |
| Interest Expense | $64.10M$28.10M | +128.1% |
| Net Income | $2.07B$8.30M | +24816.9% |
| EPS (Basic) | $1.37$0.01 | +13600.0% |
| EPS (Diluted) | $1.35$0.01 | +13400.0% |
| Shares Outstanding (Basic) | 1.51B1.50B | +0.5% |
| Shares Outstanding (Diluted) | 1.53B1.52B | +0.1% |
05—Questions
Frequently Asked Questions
What was the main driver behind Starbucks' significant profit turnaround in fiscal 2014?
The primary driver was the company's ability to 'lap' the substantial $2.8 billion Kraft litigation charge recorded in fiscal 2013. Excluding this one-time event, underlying operational improvements such as sales leverage, lower commodity costs (especially coffee), and strategic product and food initiatives also contributed significantly to the improved profitability and operating margin.
How did Starbucks' global store expansion perform in fiscal 2014?
Starbucks continued its aggressive global expansion, adding a net of 1,599 stores across all segments. The Americas segment added 317 company-operated and 381 licensed stores. The EMEA segment saw a net addition of 180 licensed stores, while the China/Asia Pacific segment added 250 company-operated and 492 licensed stores. This expansion contributed to revenue growth and market penetration.
What is Starbucks' outlook for fiscal year 2015, particularly regarding growth and the Starbucks Japan acquisition?
For fiscal 2015, Starbucks projected revenue growth of 16% to 18%, with approximately half of this growth coming from the acquisition of Starbucks Japan. The company anticipates this acquisition will provide further opportunities for disciplined retail growth and expansion into new channels within the Japanese market. Overall growth is expected to be driven by mid-single-digit comparable store sales growth and the addition of approximately 1,650 net new stores.
How did the company manage commodity costs, specifically coffee, in fiscal 2014?
Starbucks benefited from lower coffee costs in fiscal 2014, which contributed to a decrease in cost of sales including occupancy costs as a percentage of total net revenues. The company actively manages its coffee price risk through a combination of fixed-price and price-to-be-fixed purchase commitments, alongside financial derivatives, to secure supply and mitigate price volatility.
06—Continue