10-QPeriod: Q2 FY2017

STARBUCKS CORP Quarterly Report for Q2 Ended Jan 1, 2017

Filed January 31, 2017For Securities:SBUX

Summary

Starbucks Corporation (SBUX) reported solid financial results for the first quarter of fiscal year 2017, ending January 1, 2017. Total net revenues increased by 6.7% to $5.73 billion, driven by a 3% increase in global comparable store sales and the addition of 2,163 net new stores over the preceding 12 months. The company demonstrated effective cost management, with cost of sales and occupancy costs decreasing as a percentage of revenue, despite increased investments in store partners. Net earnings attributable to Starbucks grew by 9.3% to $751.8 million, resulting in diluted earnings per share of $0.51, an 11% increase from the prior year quarter. The company's performance was strong across key segments, particularly in China/Asia Pacific which saw an 18% revenue increase and significant operating margin expansion. While the Americas segment also showed revenue growth, its operating margin declined slightly due to increased partner investments. Starbucks reaffirmed its full-year fiscal 2017 outlook, expecting continued revenue growth in the mid-single digits (adjusted for currency and extra week) and earnings per share between $2.09 and $2.11, signaling confidence in its ongoing strategic initiatives.

Financial Highlights

57 data points
Beta

Revenue

$5.73B

60.0% Gross Margin

Net Income

$751.80M

13.1% Net Margin

EPS (Diluted)

$0.51

Total Assets

$14.02B

Cash & Equivalents

$2.03B

Free Cash Flow

$1.22B

Financial Statements
Beta
Revenue$5.73B
Cost of Revenue$2.29B
Gross Profit$3.44B
Operating Expenses$4.68B
Operating Income$1.13B
Interest Expense$23.80M
Net Income$751.80M
EPS (Basic)$0.52
EPS (Diluted)$0.51
Shares Outstanding (Basic)1.46B
Shares Outstanding (Diluted)1.47B

Key Highlights

  • 1Consolidated net revenues grew 6.7% to $5.73 billion.
  • 2Global comparable store sales increased by 3%, with a 4% increase in average ticket.
  • 3Diluted earnings per share (EPS) rose 11% to $0.51.
  • 4Net earnings attributable to Starbucks increased by 9.3% to $751.8 million.
  • 5The China/Asia Pacific segment experienced robust revenue growth of 18% and operating margin expansion.
  • 6Starbucks expects full-year fiscal 2017 revenue growth of 8%-10% (adjusted) and EPS between $2.09-$2.11.
  • 7The company returned significant cash to shareholders through $413.7 million in share repurchases and $364.0 million in dividend payments during the quarter.

Frequently Asked Questions

Revenue growth was primarily driven by a combination of increased revenues from company-operated stores (due to new store openings and comparable store sales growth) and licensed stores (due to increased product sales to and royalty revenues from licensees).

Overall operating expenses as a percentage of total net revenues slightly increased to 81.7% from 81.5% in the prior year quarter. However, cost of sales including occupancy costs decreased as a percentage of revenue due to sales leverage and lower commodity costs. Store operating expenses increased as a percentage of revenue, largely due to investments in store partners, particularly in the Americas.

Starbucks expects consolidated revenue growth of 8% to 10% (adjusted for currency and an extra week in fiscal 2016). The company anticipates operating margin to increase slightly and projects earnings per share to be in the range of $2.09 to $2.11. Key drivers for the year include approximately 2,100 net new store openings globally and mid-single-digit comparable store sales growth.

Starbucks generated $1.5 billion in cash from operating activities. During the quarter, the company repaid $400 million in senior notes, paid $364 million in dividends, and repurchased $413.7 million of its common stock. The company also has a $1.5 billion unsecured, revolving credit facility and a $1 billion commercial paper program available for liquidity needs.