10-KPeriod: FY2014

STARBUCKS CORP Annual Report, Year Ended Sep 28, 2014

Filed November 14, 2014For Securities:SBUX

Summary

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 billion. 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 billion 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 billion 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.

Financial Highlights

58 data points
Beta

Revenue

$16.45B

58.3% Gross Margin

Net Income

$2.07B

12.6% Net Margin

EPS (Diluted)

$1.35

Total Assets

$10.75B

Cash & Equivalents

$1.71B

Free Cash Flow

-$553.10M

Financial Statements
Beta
Revenue$16.45B
Cost of Revenue$6.86B
Gross Profit$9.59B
Operating Expenses$13.63B
Operating Income$3.08B
Interest Expense$64.10M
Net Income$2.07B
EPS (Basic)$1.37
EPS (Diluted)$1.35
Shares Outstanding (Basic)1.51B
Shares Outstanding (Diluted)1.53B

Key Highlights

  • 1Total net revenues increased 11% to $16.4 billion in fiscal 2014, up from $14.9 billion in fiscal 2013.
  • 2Global comparable store sales grew by 6%, with a 3% increase in transactions and a 3% increase in average ticket.
  • 3Operating income saw a significant improvement, turning from a $325.4 million loss in fiscal 2013 to a $3.1 billion profit in fiscal 2014.
  • 4Operating 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.
  • 5Earnings 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.
  • 6The company returned $1.6 billion to shareholders in fiscal 2014 through dividends and share repurchases.
  • 7Significant store growth continued, with a net increase of 1,599 company-operated and licensed stores globally, bringing the total to 21,366.

Frequently Asked Questions

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.

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.

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.

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.