10-QPeriod: Q3 FY2017

STARBUCKS CORP Quarterly Report for Q3 Ended Apr 2, 2017

Filed May 2, 2017For Securities:SBUX

Summary

Starbucks Corporation's (SBUX) 10-Q filing for the period ending April 2, 2017, showcases a solid performance with consolidated net revenues up 6.0% to $5.3 billion for the quarter and 6.4% to $11.0 billion for the first two quarters. This growth was primarily driven by a healthy increase in company-operated store revenues, fueled by new store openings and a 3% comparable store sales increase. The company also demonstrated strong operating income growth of 8% ($71 million) in the quarter, leading to a 15% increase in diluted earnings per share to $0.45. Key operational highlights include robust expansion in the China/Asia Pacific segment, with revenues growing 13% and operating margin expanding significantly due to tax structure changes and sales leverage. While the EMEA segment saw a revenue decline due to strategic repositioning, its operating margin improved. The company continues to invest in its partners and digital platforms, signaling a commitment to long-term growth and customer experience, while also managing commodity price volatility through hedging strategies. Shareholder returns remain a focus, with ongoing share repurchases and dividend payments.

Financial Highlights

58 data points
Beta

Revenue

$5.29B

59.6% Gross Margin

Net Income

$652.80M

12.3% Net Margin

EPS (Diluted)

$0.45

Total Assets

$14.23B

Cash & Equivalents

$2.16B

Free Cash Flow

$131.40M

Financial Statements
Beta
Revenue$5.29B
Cost of Revenue$2.14B
Gross Profit$3.15B
Operating Expenses$4.44B
Operating Income$935.40M
Interest Expense$22.90M
Net Income$652.80M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)1.45B
Shares Outstanding (Diluted)1.46B

Key Highlights

  • 1Consolidated net revenues increased by 6.0% to $5.3 billion in the second quarter and 6.4% to $11.0 billion for the first two quarters, driven by new store openings and comparable store sales growth.
  • 2Diluted earnings per share (EPS) rose by 15% to $0.45 in the second quarter compared to the prior year's $0.39.
  • 3The China/Asia Pacific segment demonstrated strong performance with a 13% revenue increase and a significant 380 basis point improvement in operating margin.
  • 4Operating margin expanded by 40 basis points to 17.7% in the second quarter, driven by sales leverage and strategic initiatives.
  • 5The company repurchased $1.0 billion of its common stock during the first two quarters of fiscal 2017, indicating a commitment to returning capital to shareholders.
  • 6Starbucks is actively managing commodity price risks through hedging strategies, with a focus on coffee and dairy prices.
  • 7Investments in partners and digital platforms are a strategic priority, expected to increase by over $250 million in fiscal 2017.

Frequently Asked Questions

Revenue growth in the second quarter was primarily driven by an increase in revenues from company-operated stores, which benefited from new store openings and a 3% growth in comparable store sales, supported by a 4% increase in average ticket.

Starbucks is repositioning the EMEA segment to a predominantly licensed model. This led to a revenue decline primarily due to the absence of revenue from the sale of Germany retail operations in the prior year, but was partially offset by higher licensed store sales from new openings and store conversions.

Starbucks is making significant investments in its partners (employees) and digital platforms, along with continued focus on product development and innovation, including the expansion of its Starbucks Reserve® and Roastery businesses. These investments are expected to increase by over $250 million in fiscal 2017.

During the first two quarters of fiscal 2017, Starbucks repurchased 19.0 million shares of common stock at a total cost of $1.0 billion. As of April 2, 2017, approximately 98.9 million shares remained available for repurchase under current authorizations.