Starbucks Q1 Consolidated Net Revenues Increased 13%

Global comparable store sales increased 5%, with a 2% increase in traffic

Jan 26, 2015 - 09:51

Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its 13-week fiscal first quarter ended December 28, 2014. Q1 FY14 GAAP results include the impact of a litigation credit related to the Kraft arbitration; Q1 FY15 GAAP results include Starbucks Japan acquisition-related items. Non-GAAP results exclude these items. Please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release.

Q1 Fiscal 2015 Highlights:


  • Consolidated net revenues increased 13% to $4.8 billion

  • Global comparable store sales increased 5%, with a 2% increase in traffic

    • Americas comp sales increased 5%, with a 2% increase in traffic

    • EMEA comp sales increased 4%, driven by a 3% increase in traffic

    • CAP comp sales increased 8%, driven entirely by increased traffic



  • Consolidated operating income reached a record $915.5 million

    • Non-GAAP operating income of $934.8 million grew 18% over Q1 FY14 non-GAAP operating income



  • Consolidated operating margin of 19.1%

    • Non-GAAP operating margin of 19.5% increased 80 basis points over Q1 FY14 non-GAAP operating margin



  • GAAP earnings per share of $1.30

    • Non-GAAP EPS of $0.80 per share grew 16% over Q1 FY14 non-GAAP EPS





  • Comparable store customer transactions increased by nearly 9 million in the U.S., nearly 12 million globally, year-over-year

  • The company opened 512 net new stores in Q1, including its first Starbucks Reserve® Roastery and Tasting Room

  • Dollars loaded on Starbucks Cards surged to a record $1.6 billion in the quarter, up 17% over prior year Q1

  • 1 in 7 Americans received a Starbucks Gift Card in Q1, up from 1 in 8 in Q1 of fiscal 2014

  • The company added 896,000 new My Starbucks Rewards members in December and now has over 9 million members


“Starbucks record Q1 fiscal 2015 financial and operating performance was exceptional by every metric and standard,” said Howard Schultz, chairman, president and ceo. “Our reimagined in-store holiday experience that included a vastly expanded assortment of Starbucks Cards, new holiday food, beverage and merchandise offerings and the opportunity to win ‘Starbucks for Life’ resonated powerfully with our customers and drove both increased traffic and tremendous excitement in our stores and around the Starbucks brand,” Schultz added.

“Starbucks results in the first quarter of fiscal 2015 were very strong, with notable growth across the globe,” said Scott Maw, Starbucks cfo. “All segments contributed to our record results in the quarter, with improved traffic growth in the US, record profitability in EMEA and 8% comps in CAP. Our continued ability to drive growth through innovation, operational excellence and our unique customer connection, along with our sharp focus on financial discipline, give us confidence in reaffirming our growth targets for fiscal 2015.”

First Quarter Fiscal 2015 Summary



































































































         
        Quarter Ended Dec 28, 2014
Comparable Store Sales(1)       Sales Growth       Change in Transactions       Change in Ticket
Consolidated       5%       2%       3%
Americas       5%       2%       3%
EMEA       4%       3%       1%
CAP       8%       8%       0%
(1) Includes only Starbucks company-operated stores open 13 months or longer.
 



































































































































                 
Operating Results       Quarter Ended        
($ in millions, except per share amounts)       Dec 28, 2014       Dec 29, 2013       Change
Net New Stores       512       417       95
Revenues       $4,803.2       $4,239.6       13%
Operating Income       $915.5       $813.5       13%
Operating Margin       19.1%       19.2%       (10) bps
EPS       $1.30       $0.71       83%
                         

Consolidated net revenues were $4.8 billion in Q1 FY15, an increase of 13% over Q1 FY14. The increase was primarily driven by incremental revenues from the acquisition of Starbucks Japan, a 5% increase in global comparable store sales and the opening of 1,641 net new stores over the past 12 months, and partially offset by unfavorable foreign currency exchange.

Consolidated operating income of $915.5 million in Q1 FY15 increased 13% from $813.5 million in Q1 FY14. Consolidated operating margin of 19.1% declined 10 basis points versus Q1 FY14. The decline is due to the impact of our ownership change in Starbucks Japan, which drove 80 basis points of margin decline. The remaining margin expansion of 70 basis points was primarily due to sales leverage, partially offset by the absence in the current quarter of a prior year litigation credit related to the FY13 conclusion of the Kraft arbitration.

Q1 Americas Segment Results




















































































































                 
        Quarter Ended        
($ in millions)       Dec 28, 2014       Dec 29, 2013       Change
Net New Stores       210       142       68
Revenues       $3,366.9       $3,073.0       10%
Operating Income       $817.5       $732.1       12%
Operating Margin       24.3%       23.8%       50 bps
                         

Net revenues for the Americas segment were $3.4 billion in Q1 FY15, an increase of 10% over Q1 FY14. The increase was driven by 5% growth in comparable store sales and incremental revenues from 766 net new store openings over the past 12 months.

Operating income of $817.5 million in Q1 FY15 increased 12% from $732.1 million in the prior year quarter. Operating margin of 24.3% expanded 50 basis points driven by sales leverage.

Q1 EMEA Segment Results




















































































































                 
        Quarter Ended        
($ in millions)       Dec 28, 2014       Dec 29, 2013       Change
Net New Stores       58       64       (6)
Revenues       $333.3       $339.5       (2)%
Operating Income       $50.0       $33.5       49%
Operating Margin       15.0%       9.9%       510 bps
                         

Net revenues for the EMEA segment were $333.3 million in Q1 FY15, a decrease of 2% versus Q1 FY14. The decrease was primarily due to unfavorable foreign currency exchange. Partially offsetting the decrease were incremental revenues from a 4% increase in comparable store sales and the opening of 184 net new licensed stores over the past 12 months.

Operating income increased 49% to $50.0 million in Q1 FY15, up from $33.5 million in Q1 FY14. Operating margin expanded 510 basis points to 15.0%, primarily due to sales leverage and continued cost management, driven by the shift in the portfolio towards more licensed stores and other operational improvements.

Q1 China/Asia Pacific Segment Results




















































































































                 
        Quarter Ended        
($ in millions)       Dec 28, 2014       Dec 29, 2013       Change
Net New Stores       234       209       25
Revenues       $495.8       $266.9       86%
Operating Income       $108.3       $81.1       34%
Operating Margin       21.8%       30.4%       (860) bps
                         

Net revenues for the China/Asia Pacific segment grew 86% to $495.8 million in Q1 FY15. The increase was primarily driven by incremental revenues from the acquisition of Starbucks Japan. Also contributing were incremental revenues from 767 net new store openings over the past 12 months and an 8% increase in comparable store sales.

Operating income grew to $108.3 million in Q1 FY15, an increase of 34% compared to Q1 FY14. Operating margin declined 860 basis points to 21.8% due to the impact of our ownership change in Starbucks Japan, which drove a 1,060 basis point decline. The remaining 200 basis point margin expansion was primarily driven by sales leverage.

Q1 Channel Development Segment Results





































































































                 
        Quarter Ended        
($ in millions)       Dec 28, 2014       Dec 29, 2013       Change
Revenues       $442.6       $401.0       10%
Operating Income       $157.5       $118.8       33%
Operating Margin       35.6%       29.6%       600 bps
                         

Net revenues for the Channel Development segment grew 10% to $442.6 million in Q1 FY15, primarily driven by increased sales of premium single serve products and packaged coffee.

Operating income of $157.5 million in Q1 FY15 grew 33% compared to Q1 FY14. Operating margin increased 600 basis points to 35.6% in Q1 FY15, primarily due to lower coffee costs and efficiencies in cost of goods sold.

Q1 All Other Segments Results





































































































                 
        Quarter Ended        
($ in millions)       Dec 28, 2014       Dec 29, 2013       Change
Net New Stores       10       2       8
Revenues       $164.6       $159.2       3%
Operating Income       $10.2       $13.6       (25)%
                         

Fiscal 2015 Targets

The company provides the following fiscal 2015 targets. Projected FY15 non-GAAP adjustments relate to the acquisition of Starbucks Japan; please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release.

The Company Reaffirms the Following Full Year Targets:


  • Revenue growth of 16% - 18%

  • Global comparable store sales growth of mid-single digits

  • GAAP operating margin is expected to be mildly dilutive versus FY14 due to the impact of our ownership change in Starbucks Japan:



    • Americas margin: modest improvement over FY14

    • EMEA margin: in the 10% - 12% range

    • China/Asia Pacific margin: in the high teens

    • Channel Development margin: modest improvement over FY14



  • Non-GAAP operating margin is expected to be flat to slightly up over prior year non-GAAP operating margin

  • Consolidated tax rate of approximately 31%

  • New store openings of 1,650 net new:



    • Americas: approximately 650, half licensed

    • EMEA: approximately 150, primarily licensed

    • China/Asia Pacific: approximately 850, two-thirds licensed



  • Capital expenditures of approximately $1.4 billion driven primarily by store investments, which include new stores, Mobile Order and Pay and the evenings program


The Company Updates the Following Targets:


  • Full year FY15 GAAP EPS is now expected to be in the range of $3.53 to $3.58



    • Q2 GAAP EPS is expected to be in the range of $0.63 to $0.64



  • Full Year FY15 non-GAAP EPS is now expected to be in the range of $3.09 to $3.13



    • Q2 non-GAAP EPS is expected to be in the range of $0.64 to $0.65




Company Updates


  • The company completed the first step of its tender offer to acquire Starbucks Japan in the quarter, bringing its total ownership of the market to a controlling 79% interest in Q1. The company completed its second step in the tender offer in Q2 bringing total ownership to 94% currently. The transaction is expected to be fully complete in the first half of calendar 2015, resulting in 100% ownership.

  • Starbucks hosted its biennial Investor Day in Seattle, Washington on Dec 4th, its first time in Seattle in 8 years. The company's business leaders provided an overview of Starbucks 5-year strategic growth plan.

  • The company launched Mobile Order and Pay in Portland, Oregon in December and announced the rest of the Pacific Northwest as its next market launch on its way towards a national rollout in 2015. Mobile Order and Pay allows customers to place orders in advance of their visit and pick them up at a participating Starbucks® store.

  • The first ever Starbucks Reserve® Roastery and Tasting Room opened in Seattle in early December. The company simultaneously announced plans to open 100 global Starbucks Reserve®-only stores which will create a specialized store experience devoted to highlighting its rare, limited availability coffees.

  • The company shipped nearly 100 million Starbucks® Coffee K-Cup® packs in the month of December, the most ever in a single month.

  • In January, Starbucks chief operating officer Troy Alstead announced that he would be taking a "Coffee Break" or sabbatical, beginning in March, after a very successful 23-year career at Starbucks.

  • The company repurchased nearly 3 million shares of common stock in Q1 FY15; 13 million shares remain available for purchase under the current authorization.

  • The Board of Directors declared a cash dividend of $0.32 per share, payable on February 20, 2015 to shareholders of record as of February 5, 2015.


 

 




































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































































           

STARBUCKS CORPORATION

CONSOLIDATED STATEMENTS OF EARNINGS

(unaudited, in millions, except per share data)

 
Quarter Ended Quarter Ended
Dec 28,
2014
      Dec 29,
2013
      %

Change

Dec 28,
2014
      Dec 29,
2013
           
    As a % of total

net revenues

Net revenues:  
Company-operated stores $ 3,772.8 $ 3,343.8 12.8 % 78.5 % 78.9 %
Licensed stores 483.9 401.8 20.4 10.1 9.5
CPG, foodservice and other 546.5   494.0   10.6 11.4   11.7  
Total net revenues 4,803.2 4,239.6 13.3 100.0 100.0
Cost of sales including occupancy costs 1,991.2 1,795.1 10.9 41.5 42.3
Store operating expenses 1,315.5 1,175.1 11.9 27.4 27.7
Other operating expenses 129.4 114.9 12.6 2.7 2.7
Depreciation and amortization expenses 206.0 169.7 21.4 4.3 4.0
General and administrative expenses 298.4 242.6 23.0 6.2 5.7
Litigation credit   (20.2 ) (100.0 )   (0.5 )
Total operating expenses 3,940.5 3,477.2 13.3 82.0 82.0
Income from equity investees 52.8   51.1   3.3 1.1   1.2  
Operating income 915.5 813.5 12.5 19.1 19.2

Gain resulting from acquisition of joint venture

390.6 nm 8.1
Interest income and other, net 9.7 19.8 (51.0 ) 0.2 0.5
Interest expense (16.3 ) (14.5 ) 12.4 (0.3 ) (0.3 )
Earnings before income taxes 1,299.5 818.8 58.7 27.1 19.3
Income taxes 315.0   278.1   13.3 6.6   6.6  
Net earnings including noncontrolling interests 984.5 540.7 82.1 20.5 12.8
Net earnings/(loss) attributable to noncontrolling interests 1.4     nm    
Net earnings attributable to Starbucks $ 983.1   $ 540.7   81.8 20.5 % 12.8 %
 
Net earnings per common share - diluted $ 1.30   $ 0.71   83.1 %
Weighted avg. shares outstanding - diluted 758.4 766.2
 
Cash dividends declared per share $ 0.32 $ 0.26
 
Supplemental Ratios:
Store operating expenses as a percentage of company-operated store revenues 34.9 % 35.1 %
Effective tax rate including noncontrolling interests 24.2 % 34.0 %
 
 

Segment Results (in millions)

Americas
















































































































































































































































































































































































































































































































                                       

Dec 28,
2014

     

Dec 29,
2013

     

%

Change

Dec 28,
2014
      Dec 29,
2013

Quarter Ended

            As a % of Americas

total net revenues

Net revenues:      
Company-operated stores $ 3,010.6 $ 2,787.0 8.0 % 89.4 % 90.7 %
Licensed stores 346.2 274.3 26.2 10.3 8.9
Foodservice and other 10.1   11.7   (13.7 ) 0.3   0.4  
Total net revenues 3,366.9 3,073.0 9.6 100.0 100.0
Cost of sales including occupancy costs 1,261.0 1,164.2 8.3 37.5 37.9
Store operating expenses 1,084.4 999.6 8.5 32.2 32.5
Other operating expenses 30.2 25.3 19.4 0.9 0.8
Depreciation and amortization expenses 127.1 112.3 13.2 3.8 3.7
General and administrative expenses 46.7   39.5   18.2 1.4   1.3  
Total operating expenses 2,549.4   2,340.9   8.9 75.7   76.2  
Operating income $ 817.5   $ 732.1   11.7 % 24.3 % 23.8 %
Supplemental Ratios:
Store operating expenses as a percentage of company-operated store revenues 36.0 % 35.9 %
 

EMEA












































































































































































































































































































































































































































































































































                                       
Dec 28,
2014
      Dec 29,
2013
      %

Change

Dec 28,
2014
      Dec 29,
2013

Quarter Ended

            As a % of EMEA

total net revenues

Net revenues:      
Company-operated stores $ 257.6 $ 269.0 (4.2 )% 77.3 % 79.2 %
Licensed stores 63.3 60.6 4.5 19.0 17.8
Foodservice 12.4   9.9   25.3 3.7   2.9  
Total net revenues 333.3 339.5 (1.8 ) 100.0 100.0
Cost of sales including occupancy costs 156.2 168.2 (7.1 ) 46.9 49.5
Store operating expenses 85.8 96.4 (11.0 ) 25.7 28.4
Other operating expenses 13.7 11.6 18.1 4.1 3.4
Depreciation and amortization expenses 13.8 14.6 (5.5 ) 4.1 4.3
General and administrative expenses 14.0   16.0   (12.5 ) 4.2   4.7  
Total operating expenses 283.5 306.8 (7.6 ) 85.1 90.4
Income from equity investees 0.2   0.8   (75.0 ) 0.1   0.2  
Operating income $ 50.0   $ 33.5   49.3 % 15.0 % 9.9 %
Supplemental Ratios:
Store operating expenses as a percentage of company-operated store revenues 33.3 % 35.8 %
 

China/Asia Pacific (CAP)











































































































































































































































































































































































































































































































































                                       
Dec 28,
2014
      Dec 29,
2013
      %

Change

Dec 28,
2014
      Dec 29,
2013

Quarter Ended

            As a % of CAP

total net revenues

Net revenues:      
Company-operated stores $ 421.8 $ 201.6 109.2 % 85.1 % 75.5 %
Licensed stores 73.2 65.3 12.1 14.8 24.5
Foodservice and other 0.8     nm 0.2    
Total net revenues 495.8 266.9 85.8 100.0 100.0
Cost of sales including occupancy costs 233.6 132.7 76.0 47.1 49.7
Store operating expenses 117.7 51.3 129.4 23.7 19.2
Other operating expenses 15.1 10.6 42.5 3.0 4.0
Depreciation and amortization expenses 28.1 10.3 172.8 5.7 3.9
General and administrative expenses 25.7   14.0   83.6 5.2   5.2  
Total operating expenses 420.2 218.9 92.0 84.8 82.0
Income from equity investees 32.7   33.1   (1.2 ) 6.6   12.4  
Operating income $ 108.3   $ 81.1   33.5 % 21.8 % 30.4 %
Supplemental Ratios:
Store operating expenses as a percentage of company-operated store revenues 27.9 % 25.4 %
 

Channel Development












































































































































































































                                       

 

Dec 28,
2014
      Dec 29,
2013
      %

Change

Dec 28,
2014
      Dec 29,
2013

Quarter Ended

            As a % of

Channel Development

total net revenues

Net revenues:      
CPG $ 343.8 $ 306.4 12.2 % 77.7 % 76.4 %
Foodservice 98.8   94.6   4.4 22.3   23.6  
Total net revenues 442.6 401.0 10.4 100.0 100.0
Cost of sales 249.3 245.6 1.5