10-QPeriod: Q3 FY2015

STARBUCKS CORP Quarterly Report for Q3 Ended Jun 28, 2015

Filed July 28, 2015For Securities:SBUX

Summary

Starbucks Corporation (SBUX) reported strong financial performance for the third quarter and first three quarters of fiscal year 2015, ending June 28, 2015. Total net revenues increased by 17.5% to $4.9 billion for the quarter, driven by a 19% rise in company-operated store revenues, a 7% increase in global comparable store sales, and incremental revenue from 1,592 net new store openings over the last 12 months. The acquisition of Starbucks Japan significantly contributed to the growth, particularly in the China/Asia Pacific segment. Despite an $81 million unfavorable impact from foreign currency translation, consolidated operating income saw a robust 22% increase to $939 million, with operating margins expanding by 70 basis points to 19.2%. Diluted Earnings Per Share (EPS) rose 21% to $0.41 compared to the prior year quarter. The company demonstrated healthy operational execution across its segments. The Americas segment showed a 12% revenue increase, fueled by 8% comparable store sales growth and new store openings. EMEA's transformation continued, with revenue declines largely due to foreign currency impacts, but operating margins improved significantly due to a shift towards higher-margin licensed stores. Channel Development also saw revenue growth, supported by premium single-serve and foodservice sales. The company reiterated its positive outlook for the full fiscal year 2015, expecting continued revenue growth driven by new stores and comparable sales, with consolidated operating margin expected to be flat year-over-year.

Financial Highlights

57 data points
Beta

Revenue

$4.88B

60.0% Gross Margin

Net Income

$626.70M

12.8% Net Margin

EPS (Diluted)

$0.41

Total Assets

$12.87B

Cash & Equivalents

$2.08B

Free Cash Flow

$441.40M

Financial Statements
Beta
Revenue$4.88B
Cost of Revenue$1.95B
Gross Profit$2.93B
Operating Expenses$4.00B
Operating Income$938.60M
Interest Expense$19.10M
Net Income$626.70M
EPS (Basic)$0.42
EPS (Diluted)$0.41
Shares Outstanding (Basic)1.50B
Shares Outstanding (Diluted)1.52B

Key Highlights

  • 1Total net revenues for the third quarter increased 17.5% to $4.9 billion, driven by strong performance in company-operated stores and a 7% increase in global comparable store sales.
  • 2The acquisition of Starbucks Japan significantly boosted revenue, particularly in the China/Asia Pacific segment, contributing $309 million in incremental revenues for the quarter.
  • 3Consolidated operating income grew 22% to $939 million, with operating margin expanding by 70 basis points to 19.2%, reflecting sales leverage and strategic improvements.
  • 4Diluted Earnings Per Share (EPS) for the quarter increased 21% to $0.41 compared to the prior year, demonstrating strong profitability.
  • 5The Americas segment continued its growth trajectory with a 12% revenue increase, supported by robust comparable store sales growth of 8%.
  • 6Capital expenditures for fiscal 2015 were expected to be approximately $1.3 billion, with a focus on new store openings and store enhancements.
  • 7Starbucks continued its commitment to returning value to shareholders, with $975.9 million in share repurchases and declaration of a $0.16 per share dividend in the first three quarters of fiscal 2015.

Frequently Asked Questions

The primary drivers of revenue growth in the third quarter were a 19% increase in company-operated store revenues, a 7% increase in global comparable store sales, and the incremental revenue from the acquisition of Starbucks Japan. Additionally, 1,592 net new store openings over the past 12 months contributed to the top-line growth.

The acquisition of Starbucks Japan, fully consolidated since October 31, 2014, was a significant contributor to revenue growth, particularly in the China/Asia Pacific segment, adding $309 million in incremental revenues for the quarter. While it positively impacted revenue, it also resulted in a 90 basis point impact on operating margin due to the change in accounting from a joint venture to a consolidated market and associated transaction/integration costs.

Starbucks expects full-year fiscal 2015 revenue growth driven by incremental contributions from the Starbucks Japan acquisition, the opening of approximately 1,650 net new stores, and mid-single-digit global comparable store sales growth. Consolidated operating margin is anticipated to be flat compared to fiscal 2014, with strong EPS growth expected.

Starbucks maintains a healthy cash and investments balance of $2.6 billion as of June 28, 2015. The company is actively returning cash to shareholders through common stock dividend payments and significant share repurchases, having repurchased $975.9 million worth of stock in the first three quarters of fiscal 2015. Capital expenditures for fiscal 2015 are planned at approximately $1.3 billion, focused on new store growth and enhancements.