10-QPeriod: Q1 FY2021

STARBUCKS CORP Quarterly Report for Q1 Ended Dec 27, 2020

Filed January 26, 2021For Securities:SBUX

Summary

Starbucks Corporation (SBUX) reported its first quarter fiscal year 2021 results, ending December 27, 2020. The company demonstrated resilience amidst the ongoing COVID-19 pandemic, with consolidated net revenues declining by 4.9% year-over-year to $6.75 billion. Despite the revenue dip, a key positive was the stabilization of operating cash flows, which remained flat compared to the prior year at $1.8 billion, indicating effective working capital management. Profitability saw a notable decrease, with net earnings attributable to Starbucks falling by 29.6% to $622.2 million, resulting in diluted EPS of $0.53, down from $0.74 in the prior year. This was driven by lower revenues, increased store operating expenses as a percentage of revenue due to sales deleverage and increased wages, and higher restructuring and impairment charges related to store portfolio optimization. However, the company's liquidity remains strong, with $5.0 billion in cash and cash equivalents and $5.5 billion in cash and investments, providing a solid financial footing for navigating the current environment and future investments.

Financial Highlights

52 data points
Beta

Revenue

$6.75B

Net Income

$622.20M

9.2% Net Margin

EPS (Diluted)

$0.53

Total Assets

$29.97B

Cash & Equivalents

$5.03B

Free Cash Flow

$1.51B

Financial Statements
Beta
Revenue$6.75B
Operating Expenses$5.92B
Operating Income$913.50M
Interest Expense$120.70M
Net Income$622.20M
EPS (Basic)$0.53
EPS (Diluted)$0.53
Shares Outstanding (Basic)1.18B
Shares Outstanding (Diluted)1.18B

Key Highlights

  • 1Consolidated net revenues decreased by 4.9% to $6.75 billion, primarily impacted by COVID-19 related disruptions.
  • 2Operating cash flow remained stable at $1.8 billion, showing resilience despite the pandemic's impact on earnings.
  • 3Net earnings attributable to Starbucks declined by 29.6% to $622.2 million, leading to a decrease in diluted EPS from $0.74 to $0.53.
  • 4Store operating expenses as a percentage of revenue increased, driven by sales deleverage and increased labor costs, partially offset by efficiencies.
  • 5Restructuring and impairment charges significantly increased to $72.2 million, primarily due to store portfolio optimization and lease asset amortization.
  • 6The company maintained a strong liquidity position with $5.0 billion in cash and cash equivalents.
  • 7Starbucks is continuing its store portfolio optimization strategy, with plans to close approximately 800 stores in the U.S. and Canada.

Frequently Asked Questions

COVID-19 significantly impacted Starbucks' performance, leading to a 4.9% decrease in consolidated net revenues to $6.75 billion. Reduced customer traffic, modified operations, and temporary store closures were the primary drivers of this decline. While profitability was affected, operating cash flows remained stable year-over-year.

Profitability declined year-over-year. Net earnings attributable to Starbucks decreased by 29.6% to $622.2 million, and diluted earnings per share fell from $0.74 to $0.53. This was due to lower revenues, increased operating expenses (particularly store operating expenses and restructuring charges), and higher interest expenses.

Starbucks maintains a strong liquidity position, with $5.03 billion in cash and cash equivalents and $5.53 billion in total cash and investments as of December 27, 2020. The company has significant borrowing capacity through its credit facilities and commercial paper program. Long-term debt stood at $15.5 billion.

Yes, restructuring and impairment expenses significantly increased to $72.2 million in this quarter, compared to $6.3 million in the prior year. This increase is primarily attributed to asset impairments related to store portfolio optimization and accelerated amortization of lease assets due to planned store closures.