10-KPeriod: FY2020

STARBUCKS CORP Annual Report, Year Ended Sep 27, 2020

Filed November 12, 2020For Securities:SBUX

Summary

Starbucks Corporation's fiscal year 2020 filing reflects significant impacts from the COVID-19 pandemic, with total net revenues declining 11% to $23.5 billion compared to fiscal 2019. This downturn was primarily driven by temporary store closures, reduced customer traffic, and modified operations across its company-operated and licensed stores. Despite these challenges, the company saw sequential improvements in comparable store sales in the latter half of the fiscal year, indicating resilience and brand strength. Key financial metrics were impacted, with operating income decreasing substantially and earnings per share falling to $0.79 from $2.92 in the prior year. The company also incurred restructuring charges related to its North America store portfolio optimization, announcing plans to close approximately 800 stores in the U.S. and Canada over the next 18 months. Starbucks continued to invest in technology and store format innovation to adapt to evolving customer behaviors, particularly towards contactless and convenient options. Shareholder returns through dividends and share repurchases were maintained, though share repurchases were temporarily suspended in March 2020.

Financial Highlights

55 data points
Beta

Revenue

$23.52B

Net Income

$928.30M

3.9% Net Margin

EPS (Diluted)

$0.79

Total Assets

$29.37B

Cash & Equivalents

$4.35B

Free Cash Flow

$114.20M

Financial Statements
Beta
Revenue$23.52B
Operating Expenses$22.28B
Operating Income$1.56B
Interest Expense$437.00M
Net Income$928.30M
EPS (Basic)$0.79
EPS (Diluted)$0.79
Shares Outstanding (Basic)1.17B
Shares Outstanding (Diluted)1.18B

Key Highlights

  • 1Total net revenues decreased by 11% to $23.5 billion in fiscal 2020, largely due to COVID-19 impacts.
  • 2Operating income significantly decreased to $1.6 billion in fiscal 2020, with operating margin contracting from 15.4% to 6.6%.
  • 3Earnings per share (EPS) diluted fell to $0.79 in fiscal 2020, down from $2.92 in fiscal 2019.
  • 4The company announced plans to close approximately 800 stores in the U.S. and Canada over the next 18 months as part of a North America store portfolio optimization strategy.
  • 5Starbucks incurred restructuring and impairment charges of $278.7 million in fiscal 2020, a substantial increase from $135.8 million in fiscal 2019, largely related to store closures.
  • 6Capital expenditures decreased to $1.5 billion in fiscal 2020 from $1.8 billion in fiscal 2019, reflecting a pause in new store openings due to the pandemic.
  • 7Share repurchases were temporarily suspended in March 2020, impacting total shareholder returns for the year.

Frequently Asked Questions

COVID-19 significantly impacted Starbucks' financial performance, leading to an 11% decrease in total net revenues to $23.5 billion. This was primarily due to temporary store closures, reduced customer traffic, and modified operating hours. The pandemic also contributed to increased costs for enhanced pay for employees and resulted in restructuring charges.

Starbucks is adapting to evolving customer preferences, particularly for convenience and contactless experiences. This includes introducing new store formats like Starbucks Pickup and leveraging digital capabilities. The company is also optimizing its North America store footprint, with plans to close approximately 800 stores in the U.S. and Canada over the next 18 months to better align with these changing behaviors.

Despite the revenue decline, Starbucks managed its liquidity by issuing new debt. While share repurchases were temporarily suspended in March 2020, the company continued to pay cash dividends. Capital expenditures were reduced compared to the previous year due to the pandemic's impact on store expansion plans.

The decrease in operating income and EPS was primarily driven by the sales deleverage resulting from the COVID-19 pandemic's impact on revenues. Additionally, incremental labor costs, such as catastrophe pay and enhanced pay programs, along with restructuring costs associated with store portfolio optimization, contributed to the decline in profitability.