10-QPeriod: Q1 FY2016

STARBUCKS CORP Quarterly Report for Q1 Ended Dec 27, 2015

Filed January 26, 2016For Securities:SBUX

Summary

Starbucks Corporation reported strong performance for the first quarter of fiscal year 2016, with total net revenues increasing by 11.9% to $5.37 billion compared to the prior year quarter. This growth was primarily driven by an 8% increase in global comparable store sales, the addition of 1,693 net new stores, and incremental revenue from the full consolidation of Starbucks Japan. Despite a $107 million negative impact from foreign currency translation, operating income rose by 16% to $1.1 billion, leading to an improved operating margin of 19.7%. While the Americas segment showed robust growth with an 11% revenue increase and an 80 basis point operating margin expansion, the China/Asia Pacific segment's revenue surged 32% due to the Starbucks Japan consolidation, though its operating margin declined. The company reaffirmed its positive outlook for fiscal year 2016, projecting revenue growth exceeding 10% and earnings per share between $1.84 and $1.86, supported by continued store expansion and investments in digital platforms and employee benefits.

Financial Highlights

57 data points
Beta

Revenue

$5.37B

59.3% Gross Margin

Net Income

$687.60M

12.8% Net Margin

EPS (Diluted)

$0.46

Total Assets

$12.94B

Cash & Equivalents

$2.26B

Free Cash Flow

$1.30B

Financial Statements
Beta
Revenue$5.37B
Cost of Revenue$2.19B
Gross Profit$3.19B
Operating Expenses$4.38B
Operating Income$1.06B
Interest Expense$16.50M
Net Income$687.60M
EPS (Basic)$0.46
EPS (Diluted)$0.46
Shares Outstanding (Basic)1.49B
Shares Outstanding (Diluted)1.50B

Key Highlights

  • 1Total net revenues increased by 11.9% to $5.37 billion, driven by comparable store sales growth of 8% and 1,693 net new store openings.
  • 2Operating income grew 16% to $1.1 billion, with operating margin expanding 60 basis points to 19.7%.
  • 3The Americas segment reported strong revenue growth of 11% and an 80 basis point increase in operating margin.
  • 4China/Asia Pacific segment revenues increased by 32%, primarily due to the full consolidation of Starbucks Japan.
  • 5The company repurchased $267.1 million of its common stock during the quarter.
  • 6Starbucks announced a new $1.5 billion unsecured, revolving credit facility, replacing its previous $750 million facility.
  • 7Full-year fiscal 2016 earnings per share are projected to be between $1.84 and $1.86.

Frequently Asked Questions

The primary drivers of revenue growth were an 8% increase in global comparable store sales, the addition of 1,693 net new stores globally, and the incremental revenue resulting from the full consolidation of Starbucks Japan.

The full consolidation of Starbucks Japan significantly boosted revenue growth in the China/Asia Pacific segment, contributing to an overall 32% increase in segment revenue. However, it also led to a decrease in the segment's operating margin due to the change in accounting from a joint venture to a company-operated business, which inherently has a lower operating margin percentage.

Starbucks expects full-year fiscal 2016 revenue growth to exceed 10%, driven by comparable store sales slightly above the mid-single digits, approximately 1,800 net new store openings, and the benefit of a 53rd fiscal week. Diluted earnings per share are projected to be in the range of $1.84 to $1.86.

Starbucks reported $2.7 billion in cash and investments as of December 27, 2015. The company is using these funds, along with its new $1.5 billion credit facility and commercial paper program, to invest in its core businesses, return cash to shareholders through dividends and share repurchases, and explore potential acquisitions. They expect operating cash flows to be sufficient for foreseeable needs.