10-QPeriod: Q3 FY2022

STARBUCKS CORP Quarterly Report for Q3 Ended Apr 3, 2022

Filed May 3, 2022For Securities:SBUX

Summary

Starbucks Corporation reported its fiscal second quarter 2022 results, showing a notable increase in net revenues, driven by strong performance in the U.S. and new store openings. Consolidated net revenues grew by 14.5% year-over-year to $7.6 billion. This growth was primarily fueled by a 12% rise in comparable store sales in North America, reflecting a combination of increased average ticket and transaction volumes. The company continued its expansion, adding 885 net new company-operated stores globally over the last twelve months. Despite the revenue growth, the company faced margin pressures. Operating margin decreased by 240 basis points to 12.4%, largely attributed to inflationary pressures on commodities and supply chain costs, alongside increased investments in partner wages and benefits. The international segment, particularly China, experienced significant headwinds due to COVID-19 related restrictions, leading to a 23% decline in comparable store sales in that market. The company also announced a temporary suspension of its share repurchase program to reallocate capital towards investments in stores and partners.

Financial Statements
Beta
Revenue$7.64B
Operating Expenses$6.74B
Operating Income$948.90M
Interest Expense$119.10M
Net Income$674.50M
EPS (Basic)$0.59
EPS (Diluted)$0.58
Shares Outstanding (Basic)1.15B
Shares Outstanding (Diluted)1.15B

Key Highlights

  • 1Consolidated net revenues increased by 14.5% to $7.6 billion for Q2 FY2022.
  • 2North America comparable store sales grew by 12%, driven by a 7% increase in average ticket.
  • 3China comparable store sales declined by 23% due to COVID-19 related restrictions.
  • 4Operating margin decreased by 240 basis points to 12.4% due to inflationary pressures and increased labor costs.
  • 5The company added 885 net new company-operated stores globally over the past 12 months.
  • 6Starbucks temporarily suspended its share repurchase program on April 4, 2022.

Frequently Asked Questions

Starbucks reported a 14.5% increase in consolidated net revenues for the second quarter of fiscal year 2022, reaching $7.6 billion, compared to $6.7 billion in the prior year. This growth was primarily driven by strong performance in company-operated stores, an increase in comparable store sales, and incremental revenues from new store openings.

The operating margin for the second quarter of fiscal year 2022 decreased by 240 basis points to 12.4%. Key factors contributing to this decline included inflationary pressures on commodity and supply chain costs, and increased investments in retail store partner wages and benefits. These were partially offset by pricing actions and sales leverage.

COVID-19 related restrictions, especially in China, significantly impacted the International segment. China's comparable store sales declined by 23% in the quarter due to severe mobility restrictions and store closures. This had a substantial effect on the overall international segment performance, though other international markets showed strong recovery.

Starbucks announced a temporary suspension of its share repurchase program on April 4, 2022, to reallocate capital towards augmenting investments in its stores and partners. Repurchases were last made on April 1, 2022. As of April 3, 2022, approximately 52.6 million shares remained available for repurchase under existing authorizations.