Starbucks Reports Record First Quarter Fiscal 2013 Results
Starbucks Reports Record First Quarter Fiscal 2013 Results
Strong Comparable Store Sales Growth of 7% in US and Americas and 6% Globally
Robust Holiday Contributes to an 11% Increase in Revenues to a Record $3.8
Billion
EPS Rises 14% to a Record $0.57
Company Reaffirms FY13 Growth Targets
Business Wire
SEATTLE -- January 24, 2013
Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its
13-week fiscal first quarter ended December 30, 2012.
Fiscal First Quarter 2013 Highlights:
* Total net revenues increased 11% to a record $3.8 billion
* Global comparable store sales grew 6%, driven by a 4% increase in traffic
and a 2% increase in average ticket
* Americas comparable store sales grew 7%, China/Asia Pacific
comparable store sales grew 11%
* Consolidated operating margin expanded 40 basis points to 16.6%
* EPS increased 14% to a record $0.57 per share, compared to $0.50 per share
in Q1 FY12
* Opened 212 net new stores globally, including the first 3 stores in India
* Sold more than 150,000 Verismo® machines since launch, marking a strong
debut of this emerging platform
* Added 1.4 million new My Starbucks Rewards members in the U.S., up 86%
over the 778,000 new members added in the U.S. in Q1 FY12
* Acquired Teavana Holdings, Inc. on December 31, making Teavana a
wholly-owned subsidiary of Starbucks and positioning Starbucks to become
the global leader in tea
“Starbucks strong performance in Q1 demonstrates the strength, and unique
resilience, of our increasingly global business, and the power and growing
relevance of the Starbucks brand to consumers and communities all around the
world,” said Howard Schultz, chairman, president and chief executive officer,
Starbucks Coffee Company. “Solid growth in our U.S. retail business, further
expansion of our Channel Development initiatives and continued successful
execution against our expansion plans throughout China and Asia Pacific all
contributed to the record results we announced today. Starbucks has never been
better positioned to achieve the goals we have set for ourselves around the
world and I have never been more optimistic about our future.”
“Record earnings in the first quarter continued our strong
momentum, reflecting the underlying strength in our core business,” commented
Troy Alstead, chief financial officer. “We delivered excellent holiday results
with 6% global comps, marking the 12th consecutive quarter of comps in excess
of 5%. Our first quarter results demonstrate both efficiency, with record US
productivity, and innovation, with the successful launch of Verismo, our
newest growth platform.”
Added Alstead, “Despite significant and unexpected cost pressures in the
quarter, we achieved our earnings growth target and delivered record
EPS. Starbucks strong Q1 performance reaffirms our confidence in the
aggressive FY13 growth targets we announced in early November. The quality and
diversity of growth drivers in the business, combined with our continued focus
on operational excellence, gives us confidence in sustainable, strong
profitable growth.”
First Quarter Fiscal
2013 Summary
Quarter Ended Dec 30, 2012
Comparable Store Sales Growth Change in Change in
Sales^(1) Transactions Ticket
Consolidated 6% 4% 2%
Americas 7% 4% 2%
EMEA (1)% 2% (3)%
CAP 11% 8% 3%
^(1) Includes only Starbucks company-operated stores open 13 months or longer.
Operating Results Quarter Ended
($ in millions, except Dec 30, 2012 Jan 1, 2012 Change
per share amounts)
Net New Stores 212 241 (29)
Revenues $3,799.6 $3,435.9 11%
Operating Income $630.6 $556.0 13%
Operating Margin 16.6% 16.2% 40 bps
EPS $0.57 $0.50 14%
Consolidated net revenues reached a record $3.8 billion in Q1 FY13, an
increase of 11% over Q1 FY12. The increase was primarily due to a 6% increase
in global comparable store sales, and incremental revenues from 401 net new
company-operated store openings over the past 12 months. The 6% increase in
comparable store sales was comprised of a 4% increase in the number of
transactions and a 2% increase in average ticket. Also contributing to
consolidated net revenue growth was 13% revenue growth in Channel Development
and 14% revenue growth in licensed stores.
Consolidated operating income increased 13% to a record $630.6 million,
compared to $556.0 million for the same period a year ago. Operating margin
expanded 40 basis points to 16.6% this quarter, compared to 16.2% in the same
period last year. The margin increase was primarily due to increased sales
leverage.
Segment Reporting Update
At the beginning of the first quarter of FY13, the company decentralized
certain leadership functions in the areas of retail marketing and category
management, global store development and partner resources, to support and
align with the respective operating segment presidents. In conjunction with
these moves, certain general and administrative and depreciation and
amortization expenses associated with these functions, which were previously
reported as unallocated corporate expenses within "Other," are now reported
within the respective operating segments to align with the regions that they
support. In order to conform prior period classifications with the new
alignment, the historical consolidated financial statements have been recast
as reflected in the segment results below. This change did not impact
historical consolidated results.
Q1 Americas Segment Results
Quarter Ended
($ in millions) Dec 30, 2012 Jan 1, 2012 Change
Net New Stores 80 95 (15)
Revenues $2,840.7 $2,578.6 10%
Operating Income $590.3 $548.9 8%
Operating Margin 20.8% 21.3% (50) bps
Net revenues for the Americas segment were $2.8 billion in Q1 FY13, an
increase of 10% over Q1 FY12. The increase was primarily due to a 7% increase
in comparable store sales, comprised of a 4% increase in the number of
transactions and a 2% increase in average ticket. Also contributing to the net
revenue increase was incremental revenues from 253 net new company-operated
store openings over the past 12 months and 11% revenue growth in licensed
stores.
Operating income increased to $590.3 million in Q1 FY13, growth of 8% compared
to $548.9 million for the same period a year ago. Operating margin decreased
50 basis points to 20.8% in Q1 FY13. The margin contraction was driven by
expenses related to the company's October global leadership conference,
litigation charges and the impact from Superstorm Sandy. These expenses
negatively impacted Q1 FY13 operating income and operating margin by $53
million and 190 basis points, respectively, compared to the same period in the
prior year. Partially offsetting those expenses was increased sales leverage.
Q1 EMEA Segment Results
Quarter Ended
($ in millions) Dec 30, 2012 Jan 1, 2012 Change
Net New Stores 7 25 (18)
Revenues $306.1 $303.0 1%
Operating Income $22.3 $18.9 18%
Operating Margin 7.3% 6.2% 110 bps
Net revenues for the EMEA segment were $306.1 million in Q1 FY13, an increase
of 1% over Q1 FY12. The increase was driven by 41% revenue growth in licensed
stores which was nearly offset by a decline in company-operated revenue as a
result of recent store portfolio optimization activities including the sale of
the Ireland store portfolio and UK airport locations to licensed partners as
well as the closure of underperforming stores in the UK.
Operating income of $22.3 million in Q1 FY13 grew 18% compared to $18.9
million for the same period a year ago. Operating margin increased 110 basis
points to 7.3% compared to 6.2% in the prior-year period. Margin expansion was
primarily driven by a continued focus on cost management and leverage from
strong licensed store revenue growth.
Q1 China/Asia Pacific Segment
Results
Quarter Ended
($ in millions) Dec 30, 2012 Jan 1, 2012 Change
Net New Stores 125 121 4
Revenues $214.1 $166.9 28%
Operating Income $72.1 $57.3 26%
Operating Margin 33.7% 34.3% (60) bps
Net revenues for the China/Asia Pacific segment were $214.1 million in Q1
FY13, an increase of 28% over Q1 FY12. The increase was primarily due to
incremental revenues from 166 net new company-operated store openings over the
past 12 months and an 11% increase in comparable store sales. Additionally,
licensed store revenue growth of 14% contributed to the revenue growth for the
region.
Operating income increased 26% to $72.1 million in Q1 FY13, compared to $57.3
million for the same period a year ago. Operating margin decreased 60 basis
points to 33.7% in Q1 FY13 compared to 34.3% in the prior-year period. The
margin contraction was primarily due to investment spending to support
continued growth in China and a shift in the composition of our store
portfolio from licensed to company-operated stores. The margin contraction was
partially offset by lower performance-based compensation compared to the same
period in the prior year when the region significantly outperformed its
operating plan.
Q1 Channel Development Segment
Results
Quarter Ended
($ in millions) Dec 30, 2012 Jan 1, 2012 Change
Revenues $379.8 $335.8 13%
Operating Income $96.8 $77.9 24%
Operating Margin 25.5% 23.2% 230 bps
Channel Development net revenues were $379.8 million in Q1 FY13, an increase
of 13% over Q1 FY12, primarily driven by sales of Starbucks- and Tazo-branded
K-Cup® packs. Also contributing to the revenue growth were incremental sales
related to the launch of the Verismo system.
Channel Development operating income grew 24% to $96.8 million in Q1 FY13
compared to $77.9 million for the same period a year ago. Operating margin
increased 230 basis points to 25.5% in Q1 FY13 compared to 23.2% in the
prior-year period. The margin expansion was mainly due to lower coffee-related
costs, partially offset by Verismo launch costs.
Fiscal 2013 Targets
Starbucks reaffirms its fiscal 2013 targets as follows:
* The opening of approximately 1,300 net new stores globally, representing
22% growth over fiscal 2012.
* Approximately 600 net new stores in the Americas, with the majority
of those in the U.S. Of the approximately 600 stores, approximately
half of the additions will be licensed stores.
* Approximately 600 net new stores in China/Asia Pacific, with licensed
stores comprising approximately half of the new additions. Of the
approximately 600 stores, slightly more than half will be in China.
* Approximately 100 net new stores in EMEA (Europe, Middle East, Russia
and Africa), with licensed stores comprising more than two thirds of
the new stores.
* Revenue growth of approximately 10% - 13%, driven by mid-single-digit
comparable store sales growth, approximately 1,300 net new store openings,
and continued strong growth in the Channel Development business.
* Full-year consolidated operating margin improvement of approximately 100
basis points over FY12 results.
* Slight operating margin improvement in the Americas and EMEA
segments.
* Some operating margin contraction in China/Asia Pacific, driven by
the shift in equity mix towards company-operated stores as well as
costs associated with accelerated store growth in China.
* 100 to 150 basis points of operating margin improvement in Channel
Development.
* Earnings per share of $2.06 to $2.15, representing growth in the range of
15% - 20%.
* Capital expenditures of approximately $1.2 billion for the full year,
reflecting the increase in new store growth and an increase in production
capacity to support recently-announced initiatives.
Company Updates
* The company opened its 100^th store in Beijing, continuing its aggressive,
profitable growth strategy in China.
* Starbucks expanded its long-term relationship with Maxim's Group to now
operate Starbucks stores in Vietnam, with the first store scheduled to
open in Ho Chi Minh City in early February 2013.
* In partnership with Tata Global Beverages Limited, Starbucks opened its
first three stores in Mumbai, India, in Q1. The first store in Delhi is
scheduled to open next month.
* The company opened its 6^th, and first Asia-based, Farmer Support Center
in Yunnan Province, China, allowing the company to work directly with
farmers to help reduce the environmental impact of the region's
coffee-growing activities and improve the livelihood of farmers and their
families.
* Approximately 7,000 company-operated Starbucks locations began accepting
Square's mobile payment application, Square Wallet, giving customers
another way to enjoy a quick, seamless payment.
* For the 15^th year, Starbucks was named one of FORTUNE magazine's “100
Best Companies to Work For.”
* Starbucks acquired Teavana Holdings, Inc., making Teavana a wholly-owned
subsidiary of Starbucks and the newest addition to Starbucks emerging
brands portfolio, which also includes Evolution Fresh, Seattle's Best
Coffee and Tazo.
* As part of its strategy to reinvent and elevate tea, the company opened
its first Tazo® tea store in Seattle's University Village shopping center,
to serve as a learning laboratory for beverage innovation.
* The Board of Directors declared a cash dividend of $0.21 per share,
payable on February 22, 2013, to shareholders of record as of February 7,
2013.
* The company repurchased 8 million shares of common stock in Q1 FY13;
approximately 29 million shares remain available for purchase under
previous authorizations.
Conference Call
Starbucks will be holding a conference call today at 2:00 p.m. Pacific Time,
which will be hosted by Howard Schultz, chairman, president and ceo, Jeff
Hansberry, president, Channel Development and Emerging Brands and Troy
Alstead, cfo. The call will be broadcast live over the Internet and can be
accessed at the company’s web site address of http://investor.starbucks.com. A
replay of the call will be available via telephone through 9:00 p.m. Pacific
Time on Friday, January 25, 2013 by calling 1-855-859-2056, reservation number
36843944. A replay of the webcast will also be available via the Investor
Relations page on Starbucks.com through approximately 5:00 p.m. Pacific Time
on Friday, February 22, 2013 at the following URL:
http://investor.starbucks.com.
The company’s consolidated statements of earnings, operating segment results,
and other additional information have been provided on the following pages in
accordance with current year classifications. This information should be
reviewed in conjunction with this press release. Please refer to the company’s
Annual Report on Form 10-K for the fiscal year ended September 30, 2012 for
additional information.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to ethically sourcing
and roasting the highest quality arabica coffee in the world. Today, with
stores around the globe, the company is the premier roaster and retailer of
specialty coffee in the world. Through our unwavering commitment to excellence
and our guiding principles, we bring the unique Starbucks Experience to life
for every customer through every cup. To share in the experience, please visit
us in our stores or online at www.starbucks.com.
Forward-Looking Statements
This release contains forward-looking statements relating to certain company
initiatives, strategies and plans, as well as trends in or expectations
regarding, earnings per share, revenues, shareholder value, operational
improvements and efficiencies, diversified business model, changes to
organizational structures, business momentum, growth and growth opportunities
overall and of specific businesses, markets and channels, sales leverage,
store traffic, average ticket, overall performance of new and existing stores,
loyalty programs, operating margins, profits, capital expenditures, operating
costs, charges, comparable store sales, store openings and closings, the
strength, health and potential of our business and brand, product innovations,
store experience, tax rate and commodity costs and their impact. These
forward-looking statements are based on currently available operating,
financial and competitive information and are subject to a number of
significant risks and uncertainties. Actual future results may differ
materially depending on a variety of factors including, but not limited to,
coffee, dairy and other raw material prices and availability, costs associated
with, and the successful execution of, the company's initiatives, strategies
and plans, the acceptance of the company's products by our customers,
fluctuations in U.S. and international economies and currencies, the impact of
competition, the effect of legal proceedings, and other risks detailed in the
company filings with the Securities and Exchange Commission, including the
“Risk Factors” section of Starbucks Annual Report on Form 10-K for the fiscal
year ended September 30, 2012. The company assumes no obligation to update any
of these forward-looking statements.
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited, in millions, except per share data)
Quarter Ended Quarter Ended
Fiscal Year Dec 30, Jan 1, % Dec 30, Jan 1,
Ended
2012 2012 Change 2012 2012
As a % of total
net revenues
Net revenues:
Company-operated $ 2,989.6 $ 2,731.8 9.4 % 78.7 % 79.5 %
stores
Licensed stores 350.2 306.6 14.2 9.2 8.9
CPG, foodservice 459.8 397.5 15.7 12.1 11.6
and other
Total net 3,799.6 3,435.9 10.6 100.0 100.0
revenues
Cost of sales
including 1,620.7 1,496.1 8.3 42.7 43.5
occupancy costs
Store operating 1,089.5 995.7 9.4 28.7 29.0
expenses
Other operating 132.5 106.7 24.2 3.5 3.1
expenses
Depreciation and
amortization 148.9 134.8 10.5 3.9 3.9
expenses
General and
administrative 231.9 191.5 21.1 6.1 5.6
expenses
Total Operating 3,223.5 2,924.8 10.2 84.8 85.1
Expenses
Income from 54.5 44.9 21.4 1.4 1.3
equity investees
Operating income 630.6 556.0 13.4 16.6 16.2
Interest income (2.9 ) 23.2 nm (0.1 ) 0.7
and other, net
Interest expense (6.6 ) (8.6 ) (23.3 ) (0.2 ) (0.3 )
Earnings before 621.1 570.6 8.9 16.3 16.6
income taxes
Income taxes 188.7 188.4 0.2 5.0 5.5
Net earnings
including 432.4 382.2 13.1 11.4 11.1
noncontrolling
interest
Net earnings
attributable to 0.2 0.1 100.0 — —
noncontrolling
interest
Net earnings
attributable to $ 432.2 $ 382.1 13.1 % 11.4 % 11.1 %
Starbucks
Net earnings per
common share - $ 0.57 $ 0.50 14.0 %
diluted
Weighted avg.
shares 761.3 768.5
outstanding -
diluted
Cash dividends
declared per $ 0.21 $ 0.17
share
Supplemental
Ratios:
Store operating
expenses as a
percentage of 36.4 % 36.4 %
company-operated
stores revenue
Effective tax
rate including 30.4 % 33.0 %
noncontrolling
interest
Segment Results
The tables below present reportable segment results net of intersegment
eliminations (in millions):
Americas
Dec 30, Jan 1, % Dec 30, Jan 1,
2012 2012 Change 2012 2012
As a % of Americas
Quarter Ended total net revenues
Net revenues:
Company-operated $ 2,586.4 $ 2,356.2 9.8 % 91.0 % 91.4 %
stores
Licensed stores 239.2 216.4 10.5 8.4 8.4
CPG, foodservice 15.1 6.0 151.7 0.5 0.2
and other
Total net 2,840.7 2,578.6 10.2 100.0 100.0
revenues
Cost of sales
including 1,092.5 1,006.7 8.5 38.5 39.0
occupancy costs
Store operating 959.8 874.8 9.7 33.8 33.9
expenses
Other operating 30.0 20.5 46.3 1.1 0.8
expenses
Depreciation and
amortization 105.4 97.1 8.5 3.7 3.8
expenses
General and
administrative 62.7 30.6 104.9 2.2 1.2
expenses
Total Operating 2,250.4 2,029.7 10.9 79.2 78.7
Expenses
Operating income $ 590.3 $ 548.9 7.5 % 20.8 % 21.3 %
Supplemental
Ratios:
Store operating
expenses as a
percentage of 37.1 % 37.1 %
company-operated
stores revenue
EMEA
Dec 30, Jan 1, % Dec 30, Jan 1,
2012 2012 Change 2012 2012
As a % of EMEA
Quarter Ended total net revenues
Net revenues:
Company-operated $ 252.7 $ 264.3 (4.4 )% 82.6 % 87.2 %
stores
Licensed stores 43.9 31.2 40.7 14.3 10.3
CPG, foodservice 9.5 7.5 26.7 3.1 2.5
and other
Total net 306.1 303.0 1.0 100.0 100.0
revenues
Cost of sales
including 152.5 150.4 1.4 49.8 49.6
occupancy costs
Store operating 90.3 93.8 (3.7 ) 29.5 31.0
expenses
Other operating 8.4 8.6 (2.3 ) 2.7 2.8
expenses
Depreciation and
amortization 14.2 14.2 — 4.6 4.7
expenses
General and
administrative 18.4 17.4 5.7 6.0 5.7
expenses
Total Operating 283.8 284.4 (0.2 ) 92.7 93.9
Expenses
Income from — 0.3 (100.0 ) — 0.1
equity investees
Operating income $ 22.3 $ 18.9 18.0 % 7.3 % 6.2 %
Supplemental
Ratios:
Store operating
expenses as a
percentage of 35.7 % 35.5 %
company-operated
stores revenue
China / Asia
Pacific (CAP)
Dec 30, Jan 1, % Dec 30, Jan 1,
2012 2012 Change 2012 2012
As a % of CAP
Quarter Ended total net revenues
Net revenues:
Company-operated $ 150.5 $ 111.3 35.2 % 70.3 % 66.7 %
stores
Licensed stores 63.6 55.6 14.4 29.7 33.3
Total net 214.1 166.9 28.3 100.0 100.0
revenues
Cost of sales
including 106.5 84.5 26.0 49.7 50.6
occupancy costs
Store operating 39.4 27.1 45.4 18.4 16.2
expenses
Other operating 10.2 11.4 (10.5 ) 4.8 6.8
expenses
Depreciation and
amortization 7.4 5.0 48.0 3.5 3.0
expenses
General and
administrative 12.6 9.2 37.0 5.9 5.5
expenses
Total Operating 176.1 137.2 28.4 82.3 82.2
Expenses
Income from 34.1 27.6 23.6 15.9 16.5
equity investees
Operating income $ 72.1 $ 57.3 25.8 % 33.7 % 34.3 %
Supplemental
Ratios:
Store operating
expenses as a
percentage of 26.2 % 24.3 %
company-operated
stores revenue
Channel
Development
Dec 30, Jan 1, % Dec 30, Jan 1,
2012 2012 Change 2012 2012
As a % of
Channel Development
Quarter Ended total net revenues
Net revenues:
CPG $ 288.3 $ 247.1 16.7 % 75.9 % 73.6 %
Foodservice 91.5 88.7 3.2 24.1 26.4
Total net 379.8 335.8 13.1 100.0 100.0
revenues
Cost of sales 235.2 220.6 6.6 61.9 65.7
Other operating 63.1 50.1 25.9 16.6 14.9
expenses
Depreciation and
amortization 0.3 0.4 (25.0 ) 0.1 0.1
expenses
General and
administrative 4.8 3.8 26.3 1.3 1.1
expenses
Total Operating 303.4 274.9 10.4 79.9 81.9
Expenses
Income from 20.4 17.0 20.0 5.4 5.1
equity investees
Operating income $ 96.8 $ 77.9 24.3 % 25.5 % 23.2 %
Other
Dec 30, Jan 1, %
2012 2012 Change
Quarter Ended
Net revenues:
Licensed stores $ 3.5 $ 3.4 2.9 %
CPG, foodservice and other 55.4 48.2 14.9
Total net revenues 58.9 51.6 14.1
Cost of sales 34.0 33.9 0.3
Other operating expenses 20.8 16.1 29.2
Depreciation and amortization 21.6 18.1 19.3
expenses
General and administrative expenses 133.4 130.5 2.2
Total Operating Expenses 209.8 198.6 5.6
Operating loss $ (150.9 ) $ (147.0 ) 2.7 %
Supplemental Information
The following supplemental information is provided for historical and
comparative purposes.
Fiscal First Quarter 2013 U.S.
Supplemental Data
Quarter Ended
($ in millions) Dec 30, 2012 Jan 1, 2012 Change
Comparable Store Sales Growth 7% 9%
Change in Transactions 4% 8%
Change in Ticket 2% 2%
Revenues $2,503.9 $2,291.8 9%
Operating Income $587.9 $522.2 13%
Operating Margin 23.5% 22.8% 70 bps
Fiscal First Quarter 2013 Store Data
The company’s store data for the periods presented are as follows:
Net stores opened
(closed) during the
period
Quarter Ended Stores open as of
Dec 30, Jan Dec 30, Jan 1,
1,
2012 2012 2012 2012
Americas:
Company-operated 30 11 7,887 7,634
Licensed stores 50 84 5,096 4,860
80 95 12,983 12,494
EMEA:
Company-operated^(1) (20 ) 8 862 880
Licensed stores^(1) 27 17 1,014 903
7 25 1,876 1,783
CAP:
Company-operated 47 35 713 547
Licensed stores 78 86 2,706 2,420
125 121 3,419 2,967
Total 212 241 18,278 17,244
^(1) EMEA store data has been adjusted for the transfer of certain
company-operated stores to licensees in the fourth quarter of fiscal 2012.
© 2013 Starbucks Coffee Company. All rights reserved.
Contact:
Starbucks Corporation
Investor Relations:
JoAnn DeGrande / Greg Smith, 206-318-7118
investorrelations@starbucks.com
or
Media:
Zack Hutson, 206-318-7100
press@starbucks.com
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