STARBUCKS CORP Quarterly Report for Q2 Ended Jan 2, 2011

Summary

Starbucks Corporation (SBUX) reported strong performance for the first quarter of fiscal year 2011, ending January 2, 2011. Total net revenues increased by 8.4% to $3.0 billion, driven by a robust 7% growth in comparable store sales globally. This growth was fueled by a 5% increase in traffic and a 2% increase in average ticket, indicating a healthy customer response to the company's offerings and operational refinements. The company saw significant improvements in profitability, with consolidated operating margin expanding to 17.0%, a substantial increase from 13.0% in the prior year. This margin expansion was driven by improved sales leverage, lower operating expenses as a percentage of revenue, and the absence of restructuring charges incurred in the previous year. Diluted Earnings Per Share (EPS) also saw a notable increase, rising 41% to $0.45 from $0.32 in the comparable period, reflecting the improved operational efficiency and revenue growth.

Key Highlights

• 1Total net revenues grew 8.4% to $3.0 billion for the 13 weeks ended January 2, 2011.
• 2Global comparable store sales increased by 7%, with the U.S. up 8% and International up 5%.
• 3Consolidated operating margin improved significantly to 17.0% from 13.0% in the prior year.
• 4Diluted Earnings Per Share (EPS) rose 41% to $0.45 from $0.32 in the prior year period.
• 5Cash flow from operations was $674 million, a slight decrease from $769 million in the prior year, primarily due to increased inventory levels.
• 6Starbucks is navigating a significant legal dispute with Kraft Foods Global regarding the termination of their licensing agreement, with arbitration pending and Kraft seeking injunctive relief.
• 7The company expects to open approximately 500 net new stores globally in fiscal 2011, with a focus on international expansion.

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