01—Abstract
Summary
Summary of the 10-K filed November 18, 2022. Cited figures are marked; the original filing is the authoritative source.
Starbucks Corporation's fiscal year 2022, ending October 2, 2022, demonstrated revenue growth despite significant headwinds, particularly in its China market due to COVID-19 restrictions.
Total net revenues increased by 11% to $32.3 billiona, driven by strong performance in the North America segment and growth in international markets outside of China. However, operating income and diluted earnings per share (EPS) saw a decline compared to the previous year, primarily attributed to substantial investments in partner wages and training, inflationary pressures on commodities and supply chain, and sales deleverage in China. The company is actively implementing its "Reinvention Plan" in the U.S. to enhance efficiency and customer experience, expecting these initiatives, along with strategic pricing, to offset ongoing cost pressures in fiscal year 2023.
Despite the operational challenges, Starbucks highlighted its brand resilience and strong customer demand. The company continued to invest in its workforce, offering comprehensive benefits and focusing on diversity, equity, and inclusion.
Financially, Starbucks returned $6.3 billionb to shareholders in fiscal 2022 through share repurchases and dividends, and resumed its share repurchase program in the first quarter of fiscal 2023 after a temporary suspension to prioritize investments in stores and partners. The company maintains a strong liquidity position and believes its future cash flows will be sufficient to fund its capital requirements and shareholder distributions.
02—Key points
Key Highlights
- Total net revenues increased 11% to $32.3 billion in fiscal 2022, driven by strong performance in North America and international markets outside of China.
- Operating income decreased to $4.6 billion and diluted EPS fell to $2.83 in fiscal 2022, primarily due to increased investments in partner wages/training and inflationary pressures.
- The China market experienced a significant comparable store sales decline (-24%) due to COVID-19 related restrictions, impacting overall international segment performance.
- Starbucks announced and is implementing its 'Reinvention Plan' in the U.S. to improve efficiency, elevate partner and customer experience, and accelerate store innovations.
- The company returned $6.3 billion to shareholders in fiscal 2022 through dividends and share repurchases, and has resumed its share repurchase program in fiscal 2023.
- Starbucks reported approximately 402,000 employees worldwide as of October 2, 2022, with a continued focus on partner well-being, diversity, and inclusion.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2022filed November 18, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $32.25B$29.06B | +11.0% |
| Operating Expenses | $27.87B$24.57B | +13.4% |
| Operating Income | $4.62B$4.87B | −5.2% |
| Interest Expense | $482.90M$469.80M | +2.8% |
| Net Income | $3.28B$4.20B | −21.9% |
| EPS (Basic) | $2.85$3.57 | −20.2% |
| EPS (Diluted) | $2.83$3.54 | −20.1% |
| Shares Outstanding (Basic) | 1.15B1.18B | −2.1% |
| Shares Outstanding (Diluted) | 1.16B1.19B | −2.3% |
05—Questions
Frequently Asked Questions
What were the main drivers of revenue growth in fiscal 2022?
Starbucks' revenue growth in fiscal 2022 was primarily driven by a robust performance in its North America segment, an 8% increase in comparable store sales in North America (due to a 5% increase in average ticket and a 2% increase in comparable transactions), and the opening of 1,120 net new company-operated stores. Growth in international markets outside of China also contributed positively.
What factors led to the decrease in operating income and diluted EPS in fiscal 2022?
The decrease in operating income and diluted EPS was mainly due to significant investments made in partner wages and training, which impacted operating margin by approximately 370 basis points. Additionally, inflationary pressures on commodities and supply chain costs (approximately 270 basis points), sales deleverage in China due to COVID-19 restrictions (approximately 110 basis points), and other factors contributed to the margin contraction.
How is Starbucks addressing the challenges in the China market?
Starbucks experienced a significant comparable store sales decline of 24% in its China market during fiscal 2022 due to COVID-19 related restrictions severely impacting customer mobility. While the company is investing in technology and partnerships in China, the text does not detail specific strategies to overcome these market-specific challenges beyond general operational adjustments.
What is the 'Reinvention Plan' and what are its objectives?
The 'Reinvention Plan' is a U.S. market initiative aimed at increasing efficiency while elevating the partner and customer experience. Its objectives include increasing partner retention and productivity through investments in wages and training, and accelerating the adoption of purpose-built store concepts and technological innovations to enhance customer convenience and connection.
06—Continue