10-QPeriod: Q2 FY2010

STARBUCKS CORP Quarterly Report for Q2 Ended Mar 28, 2010

Filed May 4, 2010For Securities:SBUX

Summary

Starbucks Corporation's (SBUX) Q2 2010 10-Q filing reveals a significant turnaround, demonstrating strong performance improvements driven by increased revenues and improved operational efficiencies. Net revenues for the 13 weeks ended March 28, 2010, rose by 8.6% to $2.53 billion, with a corresponding increase in diluted EPS to $0.28 from $0.03 in the prior year. This growth was primarily fueled by a 7% increase in comparable store sales in the US and favorable foreign currency translation. The company has successfully implemented cost-reduction initiatives and improved labor productivity, leading to substantial operating margin expansion. The company's financial position has strengthened, with cash and cash equivalents increasing to $1.09 billion. Starbucks also announced the initiation of its first-ever cash dividend, signaling confidence in its financial health and future prospects. Despite some continued challenges, such as ongoing restructuring charges (though significantly reduced from the prior year), the overall trend indicates a robust recovery and a positive outlook for sustained growth, supported by strategic investments in new products and international expansion.

Financial Highlights

53 data points
Beta

Revenue

$2.53B

58.0% Gross Margin

Net Income

$217.30M

8.6% Net Margin

EPS (Diluted)

$0.14

Total Assets

$6.14B

Cash & Equivalents

$1.09B

Free Cash Flow

$104.30M

Financial Statements
Beta
Revenue$2.53B
Cost of Revenue$1.06B
Gross Profit$1.47B
Operating Expenses$2.23B
Operating Income$339.80M
Interest Expense$8.00M
Net Income$217.30M
EPS (Basic)$0.14
EPS (Diluted)$0.14
Shares Outstanding (Basic)1.49B
Shares Outstanding (Diluted)1.53B

Key Highlights

  • 1Revenue increased by 8.6% to $2.53 billion for the 13 weeks ended March 28, 2010, compared to $2.33 billion in the prior year.
  • 2Diluted Earnings Per Share (EPS) significantly improved to $0.28 from $0.03 in the comparable prior year period.
  • 3Comparable store sales increased by 7% in the second quarter, driven by both higher transaction volume and increased average transaction value.
  • 4Operating income surged to $340 million, with operating margin expanding to 13.4% from 1.8% in the prior year, reflecting improved efficiencies and reduced restructuring charges.
  • 5Cash and cash equivalents increased substantially to $1.09 billion from $600 million at the beginning of the fiscal year.
  • 6Starbucks initiated its first-ever quarterly cash dividend of $0.10 per share.
  • 7The company ended the period with no short-term debt outstanding and a strong credit rating outlook.

Frequently Asked Questions

The primary drivers are a significant increase in comparable store sales (7% growth), driven by both higher customer traffic and increased average transaction value, coupled with substantial operational improvements and cost efficiencies implemented over the past year. These factors have led to increased sales leverage and a notable expansion in operating margins.

Starbucks' liquidity has significantly improved. Cash and cash equivalents increased to $1.09 billion from $599.8 million at the end of the prior fiscal year. The company also ended the period with no short-term debt outstanding, indicating a strong cash position and financial flexibility.

The initiation of a cash dividend ($0.10 per share) is a key development, signaling management's confidence in the company's sustained profitability and cash flow generation. It represents a move to return capital to shareholders and suggests expectations for continued financial strength.

Restructuring charges were significantly lower in this quarter compared to the prior year ($7.9 million vs. $152.1 million for the 13-week period), contributing to the improved profitability and operating margin. This reduction reflects the near completion of the company's store rationalization efforts, suggesting a continued decline in these charges going forward.