10-QPeriod: Q2 FY2016

STARBUCKS CORP Quarterly Report for Q2 Ended Mar 27, 2016

Filed April 26, 2016For Securities:SBUX

Summary

Starbucks Corporation reported strong financial results for the second quarter of fiscal year 2016, with total net revenues increasing by 9.4% year-over-year to $5.0 billion. This growth was primarily driven by a 6% increase in global comparable store sales and the addition of 1,833 net new stores over the past 12 months. Diluted earnings per share (EPS) saw a significant increase of 18% to $0.39. The company demonstrated effective cost management, with operating margin expanding by 30 basis points to 17.3%, attributed to sales leverage partially offset by strategic investments in partners and digital platforms. The Americas segment continued to be a strong performer, with revenue growth of 10% driven by comparable store sales and new store openings. The China/Asia Pacific segment also showed robust growth of 14% in revenue, supported by new store development and sustained performance in key markets like Japan. The EMEA segment experienced a slight revenue decline, primarily due to a strategic shift towards licensed stores and unfavorable currency translation, though efforts are underway to improve operating performance. The Channel Development segment reported an 8% revenue increase, boosted by premium single-serve products and favorable performance from its North American Coffee Partnership joint venture.

Financial Highlights

58 data points
Beta

Revenue

$4.99B

59.7% Gross Margin

Net Income

$575.10M

11.5% Net Margin

EPS (Diluted)

$0.39

Total Assets

$12.52B

Cash & Equivalents

$1.29B

Free Cash Flow

$213.10M

Financial Statements
Beta
Revenue$4.99B
Cost of Revenue$2.01B
Gross Profit$2.98B
Operating Expenses$4.19B
Operating Income$864.20M
Interest Expense$18.30M
Net Income$575.10M
EPS (Basic)$0.39
EPS (Diluted)$0.39
Shares Outstanding (Basic)1.47B
Shares Outstanding (Diluted)1.49B

Key Highlights

  • 1Consolidated total net revenues grew 9.4% to $5.0 billion in Q2 FY16.
  • 2Global comparable store sales increased by 6% driven by growth in transactions and average ticket.
  • 3Diluted Earnings Per Share (EPS) rose 18% to $0.39 compared to the prior year's quarter.
  • 4Operating margin improved by 30 basis points to 17.3%, indicating enhanced profitability.
  • 5Significant investments were made in partner wages/benefits and digital platforms to drive future growth.
  • 6The company repurchased $1.6 billion of common stock during the first two quarters of fiscal year 2016.
  • 7Expansion continued with 1,833 net new stores added over the trailing twelve months, with a focus on the China/Asia Pacific region.

Frequently Asked Questions

Starbucks' revenue growth was primarily driven by a 6% increase in global comparable store sales and the addition of 1,833 net new stores over the preceding 12 months. These factors were complemented by increased product sales and royalty revenues from licensed stores.

Operating expenses grew but at a slower pace than revenue, allowing operating margin to expand by 30 basis points to 17.3%. This improvement was largely due to sales leverage. However, the company made significant investments in its partners (employees) and digital platforms, which partially offset these gains.

Starbucks expects to add approximately 1,800 net new stores in fiscal 2016, with about half of these openings planned for the China/Asia Pacific segment. The company anticipates continued growth in China, aiming for it to become one of its largest international markets, and sustained performance in Japan.

Starbucks is actively managing its cash and investments to fund operations, capital expenditures, and strategic initiatives, as well as returning capital to shareholders. The company repurchased $1.6 billion of common stock in the first two quarters of fiscal 2016 and declared a quarterly cash dividend of $0.20 per share. Additionally, the Board approved an increase of 100 million shares to its share repurchase program.