Q3 Comp Store Sales Up 5% in the U.S. and
Americas, 7% in China and 4% Globally
Consolidated Net Revenues Up 8% to Q3 Record
$5.7 Billion
GAAP Earnings Per Share Total $0.47; Non-GAAP
Earnings Per Share Expand to $0.55
Company to Assume Full Ownership of East China
JV and Operate all Stores in Mainland China
Starbucks Corporation (NASDAQ:SBUX) today reported financial
results for its 13-week fiscal third quarter and 39-week fiscal
year to date ended July 2, 2017. Fiscal 2017 and fiscal 2016
GAAP results include items which are excluded from non-GAAP
results. Please refer to the reconciliation of GAAP measures to
non-GAAP measures at the end of this release for more
information.
Q3 Fiscal 2017
Highlights
- Global comparable store sales increased
4%
- Americas comp store sales increased 5%
- U.S. comp store sales increased 5%,
driven by a 5% increase in average ticket
- U.S. average ticket increased 4% -
transactions grew 1% after adjusting for the estimated impact of
order consolidation following the shift in the Starbucks Rewards™
loyalty program from a frequency-based to spend-based model in Q3
FY16
- CAP comp store sales increased 1%
- China comp store sales increased 7%,
driven by a 5% increase in transactions
- Consolidated net revenues grew 8% to a
Q3 record $5.7 billion; up 9% after excluding $53.7 million of
unfavorable foreign currency translation
- GAAP operating income increased 2% to
$1.0 billion, inclusive of impairments
- Non-GAAP operating income up 13% over
non-GAAP operating income in Q3 FY16, to $1.2 billion
- GAAP operating margin of 18.4% declined
110 basis points versus Q3 FY16, inclusive of impairments
- Non-GAAP operating margin expands 100
bps over Q3 FY16, to 20.8%
- GAAP EPS of $0.47 per share, down 8%
versus Q3 FY16, inclusive of impairments
- Non-GAAP EPS up 12% over Q3 FY16, to
$0.55 per share
- The company opened 575 net new stores
globally, bringing total store count to 26,736 across 75
countries
- Starbucks Rewards membership up 8%
year-over-year, to 13.3 million active members
- Starbucks Rewards represented 36% of
U.S. company-operated sales
- Mobile Payment increased to 30% of
transactions in U.S. company-operated stores
- Mobile Order and Pay increased to 9% of
transactions in U.S. company-operated stores
- The company repurchased 3.5 million
shares of common stock in Q3 FY17; approximately 95 million shares
remain available for purchase under current authorizations
- The Board of Directors declared a cash
dividend of $0.25 per share, payable on August 25, 2017, to
shareholders of record as August 10, 2017
“Starbucks leveraged food and beverage innovation, an elevated
in-store experience and personalized digital connections to our
customers to deliver another quarter of record financial and
operating performance, despite the softness impacting our principal
sectors overall,” said Kevin Johnson, Starbucks president and ceo.
“Continued focus on execution against our strategic priorities
enabled us to gain share and positions us well for the future.”
"Starbucks once again reported record operating and financial
performance in Q3 - reflecting the back-half acceleration we've
been anticipating," said Scott Maw, Starbucks cfo. "Nonetheless,
despite posting record performance in Q3 and further extending our
lead compared to the industry overall, the combination of trends in
the quarter and ongoing macro pressures impacting the retail and
restaurant sectors has us a bit more cautious going into Q4."
Company Announces Strategic Actions to
Advance Growth Agenda and Increase Returns
Starbucks also announced several strategic actions to optimize
its store portfolio, strengthen its core, accelerate execution
against its long-term growth strategy and further increase returns
on capital.
Company to Assume Full Ownership of the Mainland China
Market
Starbucks earlier today announced plans to consolidate its
business operations across Mainland China by acquiring the 50% of
Shanghai Starbucks Coffee Corporation that it didn’t already own
from JV partners Uni-President Enterprises Corporation ("UPEC") and
President Chain Store Corporation ("PCSC"). Customers in China have
embraced the Starbucks brand and customer experience since the
company opened its first store in the market 18 years ago.
Starbucks stores in China are among the most innovative,
coffee-forward Starbucks stores in the world, consistently
generating strong revenue and same-store sales growth, record AUV’s
and world-leading returns on investment. Mainland China is
Starbucks largest and fastest growing international market with
2,800 stores in 130 cities, employing nearly 40,000 partners.
Through this acquisition, the largest single acquisition in the
company's history, Starbucks will assume 100% ownership of
approximately 1,300 Starbucks stores in 25 cities in the Shanghai,
Jiangsu and Zhejiang Provinces. Also as announced earlier today,
concurrently with the purchase of the East China JV, UPEC and PCSC
will acquire Starbucks 50% interest in President Starbucks Coffee
Taiwan Limited, and assume 100% ownership of Starbucks operations
in Taiwan. Founded in 1997, the Taiwan JV currently operates
approximately 410 Starbucks stores in Taiwan.
Company to Close all 379 Teavana Retail Stores
As reported on the Q2 call, many of the company’s principally
mall-based Teavana retail stores have been persistently
underperforming. Following a strategic review of the Teavana store
business, the company concluded that despite efforts to reverse the
trend through creative merchandising and new store designs, the
underperformance was likely to continue. As a result, Starbucks
will close all 379 Teavana stores over the coming year, with the
majority closing by Spring 2018. The approximately 3,300 partners
impacted by these closures will receive opportunities to apply for
positions at Starbucks stores, as Starbucks remains on track to
create 240,000 new jobs globally and 68,000 in the U.S. over the
next five years.
Financial Targets
The company will discuss updates to its Q4 and full year fiscal
2017 financial targets on its third quarter fiscal 2017 earnings
conference call today.
Third Quarter
Fiscal 2017 Summary
Quarter Ended Jul 2, 2017 Comparable Store
Sales(1) Sales Growth Change in
Transactions Change in Ticket Consolidated 4%
0% 4% Americas 5% 0% 5% CAP 1% 0% 1% EMEA(2)
2% 0% 2% (1) Includes only Starbucks company-operated
stores open 13 months or longer. Comparable store sales exclude the
effect of fluctuations in foreign currency exchange rates. (2)
Company-operated stores represent 18% of the EMEA segment store
portfolio as of July 2, 2017.
Operating
Results Quarter Ended Change ($ in
millions, except per share amounts)
Jul 2, 2017
Jun 26, 2016 Net New Stores 575 474 101
Revenues $5,661.5 $5,238.0 8% Operating Income $1,044.2 $1,022.3 2%
Operating Margin 18.4% 19.5% (110) bps EPS $0.47
$0.51 (8)%
Consolidated net revenues were $5.7 billion in Q3 FY17, an
increase of 8% over Q3 FY16. The increase was primarily driven by
incremental revenues from the opening of 2,341 net new stores over
the past 12 months and 4% growth in global comparable store
sales.
Consolidated operating income grew 2% to $1,044.2 million in Q3
FY17, up from $1,022.3 million in Q3 FY16. Consolidated operating
margin declined 110 basis points to 18.4% primarily due to goodwill
and store asset impairments, which drove a 210 basis point decline,
largely related to the change in strategic direction for Teavana.
Excluding these impairments, margin expanded by 100 basis points
driven primarily by sales leverage, partially offset by increased
partner investments, largely in the Americas segment.
Q3 Americas
Segment Results
Quarter Ended Change ($ in
millions)
Jul 2, 2017 Jun 26, 2016
Net New Stores 244 194 50 Revenues $3,991.9 $3,645.5
10% Operating Income $974.8 $898.5 8% Operating Margin 24.4%
24.6% (20) bps
Net revenues for the Americas segment were $4.0 billion in Q3
FY17, an increase of 10% over Q3 FY16. The increase was driven by
incremental revenues from 1,002 net new store openings over the
past 12 months and 5% growth in comparable store sales.
Operating income of $974.8 million in Q3 FY17 grew 8% versus
$898.5 million in Q3 FY16. Operating margin of 24.4% declined 20
basis points primarily due to higher investments in our store
partners (employees), the impact of product sales mix and higher
commodity costs. These decreases were largely offset by sales
leverage.
Q3 China/Asia
Pacific Segment Results
Quarter Ended Change ($ in
millions)
Jul 2, 2017 Jun 26, 2016
Net New Stores 250 209 41 Revenues $840.6 $768.2 9%
Operating Income $223.8 $182.8 22% Operating Margin 26.6%
23.8% 280 bps
Net revenues for the China/Asia Pacific segment grew 9% over Q3
FY16 to $840.6 million in Q3 FY17. The increase was primarily
driven by incremental revenues from 1,056 net new store openings
over the past 12 months and 1% growth in comparable store sales,
partially offset by unfavorable foreign currency translation.
Q3 FY17 operating income of $223.8 million grew 22% over Q3 FY16
operating income of $182.8 million. Operating margin expanded 280
basis points to 26.6% primarily driven by the transition to China's
value added tax structure in Q3 FY16. Also contributing was higher
income from our joint venture operations in the region.
Q3 EMEA Segment
Results
Quarter Ended Change ($ in
millions)
Jul 2, 2017 Jun 26, 2016
Net New Stores 87 77 10 Revenues $249.9 $273.4 (9)%
Operating Income $9.8 $29.9 (67)% Operating Margin 3.9%
10.9% (700) bps
Net revenues for the EMEA segment were $249.9 million in Q3
FY17, a 9% decrease versus Q3 FY16. The decrease was primarily
driven by the absence of revenue related to the sale of our Germany
retail operations in Q3 FY16 as part of the ongoing shift to more
licensed stores in the region, as well as unfavorable foreign
currency translation. Partially offsetting these decreases were
incremental revenues from the opening of 311 net new licensed
stores over the past 12 months.
Operating income of $9.8 million in Q3 FY17 declined 67% versus
operating income of $29.9 million in Q3 FY16. Operating margin
declined 700 basis points to 3.9% due to a partial impairment of
goodwill for our Switzerland market, which drove a 720 basis point
decline. The remaining 20 basis point expansion was driven by
leverage due to the shift in the portfolio towards more licensed
stores, primarily driven by the sale of our Germany retail
operations in Q3 FY16, and was partially offset by unfavorable
foreign currency exchange.
Q3 Channel
Development Segment Results
Quarter Ended Change ($ in
millions)
Jul 2, 2017 Jun 26, 2016
Revenues $478.7 $440.8 9% Operating Income $210.2
$187.8 12% Operating Margin 43.9% 42.6% 130
bps
Net revenues for the Channel Development segment grew 9% over Q3
FY16 to $478.7 million in Q3 FY17. The increase was primarily
driven by higher international sales, increased sales of premium
single-serve and packaged coffee products, and higher foodservice
sales.
Operating income of $210.2 million in Q3 FY17 increased 12%
compared to Q3 FY16. Operating margin expanded 130 basis points to
43.9% primarily driven by lower coffee costs and higher income from
the North American Coffee Partnership.
Q3 All Other
Segments Results
Quarter Ended Change ($ in
millions)
Jul 2, 2017 Jun 26, 2016
Net New Stores (6) (6) 0 Revenues $100.4 $110.1 (9)%
Operating Loss $(112.3) $(14.9) 654%
All Other Segments primarily includes Teavana-branded stores,
Seattle’s Best Coffee, as well as Starbucks Reserve® and Roastery
businesses. The increase in the operating loss in Q3 FY17 compared
to Q3 FY16 was primarily due to the goodwill and asset impairment
charges as a result of our strategy to focus on Teavana tea within
Starbucks stores.
Year to Date
Financial Results
Three Quarters Ended Comparable Store
Sales(1) Sales Growth Change in
Transactions Change in Ticket Consolidated 3%
(1)% 4% Americas 4% (1)% 4% CAP 3% 1% 2% EMEA(2)
0% (1)% 1% (1) Includes only Starbucks
company-operated stores open 13 months or longer. Comparable store
sales exclude the effect of fluctuations in foreign currency
exchange rates. (2) Company-operated stores represent 18% of the
EMEA segment store portfolio as of July 2, 2017.
Operating Results Three Quarters Ended
Change ($ in millions, except per share amounts)
Jul 2, 2017 Jun 26, 2016 Net New Stores
1,651 1,352 299 Revenues $16,688.5 $15,604.7 7% Operating
Income $3,112.1 $2,944.5 6% Operating Margin 18.6% 18.9% (30) bps
EPS $1.43 $1.35 6%
Conference Call
Starbucks will hold a conference call today at 2:00 p.m. Pacific
Time, which will be hosted by Kevin Johnson, president and ceo;
Matt Ryan, chief strategy officer; and Scott Maw, cfo. The call
will be webcast and can be accessed at
http://investor.starbucks.com. A replay of the webcast will be
available until end of day Saturday, August 26, 2017.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to
ethically sourcing and roasting high-quality arabica coffee. 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 news.starbucks.com or
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 our diversified business model,
the strength, resilience, momentum and potential of our business,
operations and brand, our customer base, our innovation, growth and
growth opportunities and related investments, revenues, operating
margins, comparable store sales and transactions, net new stores
and their performance, our Starbucks Reserve® Roasteries and
Starbucks Reserve® stores, return to shareholders, and our
strategic, operational and digital moves, including the purchase of
the remaining 50% ownership of the East China market and the
closure of Teavana stores. 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,
fluctuations in U.S. and international economies and currencies,
our ability to preserve, grow and leverage our brands, potential
negative effects of incidents involving food or beverage-borne
illnesses, tampering, contamination or mislabeling, potential
negative effects of material breaches of our information technology
systems to the extent we experience a material breach, material
failures of our information technology systems, costs associated
with, and the successful execution of, the company’s initiatives
and plans, including the integration of Starbucks Japan, the
purchase of the remaining 50% ownership of the East China market
and the closure of Teavana stores, the acceptance of the company’s
products by our customers, the impact of competition, coffee, dairy
and other raw materials prices and availability, 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 October 2, 2016. The company assumes no
obligation to update any of these forward-looking statements.
STARBUCKS
CORPORATIONCONSOLIDATED STATEMENTS OF
EARNINGS(unaudited, in millions, except per share data)
Quarter Ended Quarter Ended
Jul 2,2017
Jun 26,2016
%Change
Jul 2,2017
Jun 26,2016
As a % of totalnet revenues Net
revenues: Company-operated stores $ 4,509.0 $ 4,181.6 7.8 %
79.6 % 79.8 % Licensed stores 588.3 527.2 11.6 10.4 10.1 CPG,
foodservice and other 564.2 529.2 6.6 10.0
10.1
Total net revenues 5,661.5 5,238.0
8.1 100.0 100.0 Cost of sales including
occupancy costs 2,249.1 2,060.3 9.2 39.7 39.3 Store operating
expenses 1,628.9 1,529.4 6.5 28.8 29.2 Other operating expenses
142.5 137.5 3.6 2.5 2.6 Depreciation and amortization expenses
252.6 247.6 2.0 4.5 4.7 General and administrative expenses 325.0
323.4 0.5 5.7 6.2 Goodwill and other asset impairments(1) 120.2
— nm 2.1 — Total operating expenses
4,718.3 4,298.2 9.8 83.3 82.1 Income from equity investees 101.0
82.5 22.4 1.8 1.6
Operating
income 1,044.2 1,022.3 2.1 18.4
19.5 Interest income and other, net 31.7 72.9 (56.5 ) 0.6
1.4 Interest expense (23.5 ) (21.8 ) 7.8 (0.4 ) (0.4 ) Earnings
before income taxes 1,052.4 1,073.4 (2.0 ) 18.6 20.5 Income tax
expense 361.1 318.9 13.2 6.4 6.1 Net
earnings including noncontrolling interests 691.3 754.5 (8.4 ) 12.2
14.4 Net earnings/(loss) attributable to noncontrolling interests
(0.3 ) 0.4 nm — —
Net earnings attributable
to Starbucks $ 691.6 $ 754.1
(8.3 ) 12.2 % 14.4
% Net earnings per common share - diluted
$ 0.47 $ 0.51 (7.8
)% Weighted avg. shares outstanding - diluted 1,459.4
1,479.3 Cash dividends declared per share $ 0.25 $ 0.20
Supplemental Ratios: Store operating expenses as a %
of company-operated store revenues 36.1 % 36.6 % Other operating
expenses as a % of non-company-operated store revenues 12.4 % 13.0
% Effective tax rate including noncontrolling interests 34.3 % 29.7
%
(1) Represents goodwill impairment and
other asset impairment charges of $69.3 million and $33.0 million,
respectively, associated with our Teavana-branded stores and
goodwill impairment of $17.9 million related to our Switzerland
retail business.
Three Quarters Ended Three
Quarters Ended
Jul 2,2017
Jun 26,2016
%Change
Jul 2,2017
Jun 26,2016
As a % of totalnet revenues Net
revenues: Company-operated stores $ 13,173.7 $ 12,336.3 6.8
% 78.9 % 79.1 % Licensed stores 1,737.4 1,561.0 11.3 10.4 10.0 CPG,
foodservice and other(1) 1,777.4 1,707.4 4.1 10.7
10.9
Total net revenues 16,688.5
15,604.7 6.9 100.0 100.0 Cost of sales
including occupancy costs 6,685.3 6,256.9 6.8 40.1 40.1 Store
operating expenses 4,853.5 4,502.0 7.8 29.1 28.9 Other operating
expenses 422.7 423.3 (0.1 ) 2.5 2.7 Depreciation and amortization
expenses 756.0 730.9 3.4 4.5 4.7 General and administrative
expenses 1,008.2 959.4 5.1 6.0 6.1 Goodwill and other asset
impairments(2) 120.2 — nm 0.7 — Total
operating expenses 13,845.9 12,872.5 7.6 83.0 82.5 Income from
equity investees 269.5 212.3 26.9 1.6 1.4
Operating income 3,112.1 2,944.5
5.7 18.6 18.9 Interest income and other,
net(3) 123.7 95.5 29.5 0.7 0.6 Interest expense (70.2 ) (56.6 )
24.0 (0.4 ) (0.4 ) Earnings before income taxes 3,165.6 2,983.4 6.1
19.0 19.1 Income tax expense 1,070.1 966.2 10.8 6.4
6.2 Net earnings including noncontrolling interests
2,095.5 2,017.2 3.9 12.6 12.9 Net earnings/(loss) attributable to
noncontrolling interests (0.6 ) 0.4 nm — —
Net earnings attributable to Starbucks $
2,096.1 $ 2,016.8 3.9
% 12.6 % 12.9 % Net
earnings per common share - diluted $ 1.43
$ 1.35 5.9 % Weighted avg.
shares outstanding - diluted 1,464.9 1,489.7 Cash dividends
declared per share $ 0.75 $ 0.60
Supplemental Ratios:
Store operating expenses as a % of company-operated store revenues
36.8 % 36.5 % Other operating expenses as a % of
non-company-operated store revenues 12.0 % 13.0 % Effective tax
rate including noncontrolling interests 33.8 % 32.4 %
(1) CPG revenues included an unfavorable
revenue deduction adjustment pertaining to periods prior to FY17 of
$13.2 million, as recorded in Q2 FY17.
(2) Represents goodwill impairment and
other asset impairment charges of $69.3 million and $33.0 million,
respectively, associated with our Teavana-branded stores and
goodwill impairment of $17.9 million related to our Switzerland
retail business.
(3) Included in interest income and other,
net is the Q2 FY17 gain on the sale of our investment in Square,
Inc. warrants of $40.5 million.
Segment Results
(in millions)
Americas
Jul 2,2017
Jun 26,2016
%Change
Jul 2,2017
Jun 26,2016
Quarter
Ended
As a % of Americastotal net
revenues
Net revenues: Company-operated stores $ 3,576.4 $ 3,269.0 9.4 %
89.6 % 89.7 % Licensed stores 404.5 368.6 9.7 10.1 10.1 Foodservice
and other 11.0 7.9 39.2 0.3 0.2
Total net revenues 3,991.9 3,645.5 9.5
100.0 100.0 Cost of sales including occupancy costs
1,441.7 1,289.0 11.8 36.1 35.4 Store operating expenses 1,338.8
1,236.1 8.3 33.5 33.9 Other operating expenses 33.1 25.4 30.3 0.8
0.7 Depreciation and amortization expenses 152.8 149.2 2.4 3.8 4.1
General and administrative expenses 50.7 47.3 7.2 1.3
1.3 Total operating expenses 3,017.1 2,747.0
9.8 75.6 75.4
Operating income $
974.8 $ 898.5 8.5
% 24.4 % 24.6 % Supplemental
Ratios: Store operating expenses as a % of company-operated
store revenues 37.4 % 37.8 % Other operating expenses as a % of
non-company-operated store revenues 8.0 % 6.7 %
Three Quarters
Ended
Net revenues: Company-operated stores $ 10,472.3 $ 9,697.2 8.0 %
89.5 % 89.6 % Licensed stores 1,202.5 1,108.0 8.5 10.3 10.2
Foodservice and other 28.9 22.0 31.4 0.2 0.2
Total net revenues 11,703.7 10,827.2
8.1 100.0 100.0 Cost of sales including
occupancy costs 4,236.9 3,865.9 9.6 36.2 35.7 Store operating
expenses 3,994.3 3,649.6 9.4 34.1 33.7 Other operating expenses
96.5 85.7 12.6 0.8 0.8 Depreciation and amortization expenses 460.6
441.6 4.3 3.9 4.1 General and administrative expenses 156.0
139.3 12.0 1.3 1.3 Total operating expenses
8,944.3 8,182.1 9.3 76.4 75.6
Operating income $ 2,759.4 $
2,645.1 4.3 % 23.6 %
24.4 % Supplemental Ratios: Store operating
expenses as a % of company-operated store revenues 38.1 % 37.6 %
Other operating expenses as a % of non-company-operated store
revenues 7.8 % 7.6 %
China/Asia Pacific (CAP)
Jul 2,2017
Jun 26,2016
%Change
Jul 2,2017
Jun 26,2016
Quarter
Ended
As a % of CAPtotal net
revenues
Net revenues: Company-operated stores $ 756.8 $ 695.4 8.8 % 90.0 %
90.5 % Licensed stores 82.3 71.6 14.9 9.8 9.3 Foodservice and other
1.5 1.2 25.0 0.2 0.2
Total net
revenues 840.6 768.2 9.4 100.0
100.0 Cost of sales including occupancy costs 353.5 331.2
6.7 42.1 43.1 Store operating expenses 212.1 200.4 5.8 25.2 26.1
Other operating expenses 17.5 16.2 8.0 2.1 2.1 Depreciation and
amortization expenses 51.0 45.7 11.6 6.1 5.9 General and
administrative expenses 34.5 32.1 7.5 4.1 4.2
Total operating expenses 668.6 625.6 6.9 79.5 81.4 Income
from equity investees 51.8 40.2 28.9 6.2 5.2
Operating income $ 223.8
$ 182.8 22.4 % 26.6
% 23.8 % Supplemental Ratios: Store
operating expenses as a % of company-operated store revenues 28.0 %
28.8 % Other operating expenses as a % of non-company-operated
store revenues 20.9 % 22.3 %
Three Quarters
Ended
Net revenues: Company-operated stores $ 2,136.1 $ 1,884.0 13.4 %
89.7 % 89.7 % Licensed stores 238.7 210.7 13.3 10.0 10.0
Foodservice and other 5.5 4.9 12.2 0.2 0.2
Total net revenues 2,380.3 2,099.6
13.4 100.0 99.9 Cost of sales including
occupancy costs 1,024.3 933.5 9.7 43.0 44.5 Store operating
expenses 618.9 558.0 10.9 26.0 26.6 Other operating expenses 54.2
48.3 12.2 2.3 2.3 Depreciation and amortization expenses 148.9
131.7 13.1 6.3 6.3 General and administrative expenses 109.2
93.2 17.2 4.6 4.4 Total operating expenses
1,955.5 1,764.7 10.8 82.2 84.0 Income from equity investees 138.4
104.3 32.7 5.8 5.0
Operating
income $ 563.2 $ 439.2
28.2 % 23.7 % 20.9
% Supplemental Ratios: Store operating expenses as a
% of company-operated store revenues 29.0 % 29.6 % Other operating
expenses as a % of non-company-operated store revenues 22.2 % 22.4
%
EMEA
Jul 2,2017
Jun 26,2016
%Change
Jul 2,2017
Jun 26,2016
Quarter
Ended
As a % of EMEAtotal net
revenues
Net revenues: Company-operated stores $ 136.2 $ 174.3 (21.9 )% 54.5
% 63.8 % Licensed stores 100.9 86.2 17.1 40.4 31.5 Foodservice 12.8
12.9 (0.8 ) 5.1 4.7
Total net
revenues 249.9 273.4 (8.6 )
100.0 100.0 Cost of sales including occupancy costs
134.0 139.2 (3.7 ) 53.6 50.9 Store operating expenses 53.8 69.0
(22.0 ) 21.5 25.2 Other operating expenses 15.1 13.4 12.7 6.0 4.9
Depreciation and amortization expenses 7.7 10.3 (25.2 ) 3.1 3.8
General and administrative expenses 11.6 11.6 — 4.6 4.2 Goodwill
and other asset impairments(1) 17.9 — nm 7.2 —
Total operating expenses 240.1 243.5 (1.4 )
96.1 89.1
Operating income $ 9.8
$ 29.9 (67.2 )%
3.9 % 10.9 % Supplemental
Ratios: Store operating expenses as a % of company-operated
store revenues 39.5 % 39.6 % Other operating expenses as a % of
non-company-operated store revenues 13.3 % 13.5 %
Three Quarters
Ended
Net revenues: Company-operated stores $ 409.6 $ 576.0 (28.9 )% 55.1
% 67.4 % Licensed stores 294.0 239.3 22.9 39.5 28.0 Foodservice
40.3 39.4 2.3 5.4 4.6
Total net
revenues 743.9 854.7 (13.0 )
100.0 100.0 Cost of sales including occupancy costs
392.6 427.2 (8.1 ) 52.8 50.0 Store operating expenses 151.0 209.4
(27.9 ) 20.3 24.5 Other operating expenses 45.3 42.0 7.9 6.1 4.9
Depreciation and amortization expenses 22.9 32.4 (29.3 ) 3.1 3.8
General and administrative expenses 32.7 39.4 (17.0 ) 4.4 4.6
Goodwill and other asset impairments(1) 17.9 — nm 2.4
— Total operating expenses 662.4 750.4 (11.7 ) 89.0
87.8 Income from equity investees — 1.5 (100.0 ) —
0.2
Operating income $ 81.5
$ 105.8 (23.0 )%
11.0 % 12.4 % Supplemental
Ratios: Store operating expenses as a % of company-operated
store revenues 36.9 % 36.4 % Other operating expenses as a % of
non-company-operated store revenues 13.6 % 15.1 %
(1) Represents goodwill impairment related
to our Switzerland retail business, as recorded in Q3 FY17.
Channel Development
Jul 2,2017
Jun 26,2016
%Change
Jul 2,2017
Jun 26,2016
Quarter
Ended
As a % ofChannel Development
total net revenues
Net revenues: CPG $ 364.3 $ 333.0 9.4 % 76.1 % 75.5 % Foodservice
114.4 107.8 6.1 23.9 24.5
Total net
revenues 478.7 440.8 8.6 100.0
100.0 Cost of sales 252.5 232.3 8.7 52.7 52.7 Other
operating expenses 62.0 58.0 6.9 13.0 13.2 Depreciation and
amortization expenses 0.5 0.7 (28.6 ) 0.1 0.2 General and
administrative expenses 2.7 4.3 (37.2 ) 0.6
1.0 Total operating expenses 317.7 295.3 7.6 66.4 67.0
Income from equity investees 49.2 42.3 16.3 10.3
9.6
Operating income $ 210.2
$ 187.8 11.9 %
43.9 % 42.6 %
Three Quarters
Ended
Net revenues: CPG(1) $ 1,147.6 $ 1,086.5 5.6 % 76.8 % 76.8 %
Foodservice 346.0 327.5 5.6 23.2 23.2
Total net revenues 1,493.6 1,414.0 5.6
100.0 100.0 Cost of sales 795.5 770.6 3.2 53.3 54.5
Other operating expenses 172.9 171.8 0.6 11.6 12.1 Depreciation and
amortization expenses 1.7 2.1 (19.0 ) 0.1 0.1 General and
administrative expenses 8.1 13.0 (37.7 ) 0.5
0.9 Total operating expenses 978.2 957.5 2.2 65.5 67.7
Income from equity investees 131.1 106.5 23.1 8.8
7.5
Operating income $ 646.5
$ 563.0 14.8 %
43.3 % 39.8 %
(1) CPG revenues included an unfavorable
revenue deduction adjustment pertaining to periods prior to FY17 of
$13.2 million, as recorded in Q2 FY17.
All Other Segments
Jul 2,2017
Jun 26,2016
%Change
Quarter
Ended
Net revenues: Company-operated stores $ 39.6 $ 42.9 (7.7 )%
Licensed stores 0.6 0.8 (25.0 ) CPG, foodservice and other 60.2
66.4 (9.3 )
Total net revenues 100.4
110.1 (8.8 ) Cost of sales including occupancy
costs 64.8 68.3 (5.1 ) Store operating expenses 24.2 23.9 1.3 Other
operating expenses 14.6 24.3 (39.9 ) Depreciation and amortization
expenses 3.0 3.1 (3.2 ) General and administrative expenses 3.8 5.4
(29.6 ) Goodwill and other asset impairments(1) 102.3 —
nm Total operating expenses 212.7 125.0 70.2
Operating loss $ (112.3 ) $
(14.9 ) 653.7 %
Three Quarters
Ended
Net revenues: Company-operated stores $ 155.7 $ 179.1 (13.1 )%
Licensed stores 2.2 3.0 (26.7 ) CPG, foodservice and other 209.1
227.1 (7.9 )
Total net revenues 367.0
409.2 (10.3 ) Cost of sales including
occupancy costs 229.5 246.7 (7.0 ) Store operating expenses 89.3
85.0 5.1 Other operating expenses 52.8 75.3 (29.9 ) Depreciation
and amortization expenses 9.3 10.1 (7.9 ) General and
administrative expenses 11.7 20.2 (42.1 ) Goodwill and other asset
impairments(1) 102.3 — nm Total operating expenses
494.9 437.3 13.2
Operating loss $
(127.9 ) $ (28.1 ) 355.2
%
(1) Represents goodwill impairment and
other asset impairment charges of $69.3 million and $33.0 million,
respectively, associated with our Teavana-branded stores, as
recorded in Q3 FY17.
Supplemental
Information
The following supplemental information is provided for
historical and comparative purposes.
U.S. Supplemental
Data
Quarter Ended ($ in millions)
Jul 2, 2017 Jun 26, 2016 Change
Revenues $3,653.6 $3,327.1 10% Comparable Store Sales
Growth(1) 5% 4% Change in Transactions 0% 0% Change in Ticket
5% 4% (1) Includes only Starbucks
company-operated stores open 13 months or longer.
Store
Data
Net stores opened/(closed) and transferred during
the period Quarter Ended
Three Quarters Ended Stores open as of
Jul 2,2017
Jun 26,2016
Jul 2,2017
Jun 26,2016
Jul 2,2017
Jun 26,2016
Americas: Company-operated stores 125 85 282 204 9,301 8,875
Licensed stores 119 109 413 293 7,001
6,425 Total Americas 244 194 695 497
16,302 15,300 China/Asia Pacific: Company-operated
stores 116 79 287 223 3,098 2,675 Licensed stores 134 130
453 442 4,085 3,452 Total China/Asia
Pacific 250 209 740 665 7,183
6,127 EMEA(1): Company-operated stores 1 (147 ) (17 ) (196 ) 506
541 Licensed stores 86 224 245 399
2,364 2,024 Total EMEA 87 77 228 203
2,870 2,565 All Other Segments(2): Company-operated
stores (5 ) (5 ) (14 ) (10 ) 344 365 Licensed stores (1 ) (1 ) 2
(3 ) 37 38 Total All Other Segments (6 ) (6 ) (12 )
(13 ) 381 403
Total Company 575 474
1,651 1,352 26,736
24,395 (1) EMEA store data includes the transfer of
144 Germany company-operated retail stores to licensed stores as a
result of the sale to AmRest Holdings SE in the third quarter of
fiscal 2016. (2) As of July 2, 2017, All Other Segments included
379 Teavana-branded stores, of which 342 stores were
company-operated.
Non-GAAP Disclosure
In addition to the GAAP results provided in this release, the
company provides certain non-GAAP financial measures. Non-GAAP
financial measures are not in accordance with, or alternatives for,
generally accepted accounting principles in the United States. Our
non-GAAP financial measures of non-GAAP operating income, non-GAAP
operating margin and non-GAAP EPS exclude the below listed items.
The GAAP measures most directly comparable to non-GAAP operating
income, non-GAAP operating margin and non-GAAP EPS are operating
income, operating margin and diluted net earnings per share,
respectively.
Non-GAAP Exclusion
Rationale Goodwill and other asset
impairments Management excludes Teavana related goodwill and store
asset impairment and Switzerland goodwill impairment. These items
do not contribute to a meaningful evaluation of the company’s
future operating performance or comparisons to the company’s past
operating performance. Starbucks Japan acquisition-related
items Management excludes Starbucks Japan acquisition-related
transaction costs as these items do not reflect expected future
expenses and do not contribute to a meaningful evaluation of the
company's future operating performance or comparisons to the
company's past operating performance. In addition, management
excludes Starbucks Japan integration costs and amortization of the
acquired intangible assets when evaluating performance because
these expenses are not representative of our core business
operations. Although these items will affect earnings per share
beyond the current fiscal year, the majority of these costs will be
recognized over a finite period of time. More specifically,
integration costs are expected to be concentrated in the first
several years post-acquisition. Additionally, the amounts of the
acquired intangible assets are specific to the transaction, and the
related future amortization was fixed at the time of acquisition
and generally cannot subsequently be changed or influenced by
management. Sale of Germany retail operations Management
excludes the net gain, associated costs and changes in estimated
indemnifications related to the sale of our Germany retail
operations as these items do not reflect future gains, losses or
tax impacts and do not contribute to a meaningful evaluation of the
company's past or future operating performance. Other tax
matters Management excludes incremental tax benefits in the U.S. as
these tax benefits do not contribute to a meaningful evaluation of
the company's past or future operating performance.
Non-GAAP operating income, non-GAAP operating margin and
non-GAAP EPS may have limitations as analytical tools. These
measures should not be considered in isolation or as a substitute
for analysis of the company's results as reported under GAAP. Other
companies may calculate these non-GAAP financial measures
differently than the company does, limiting the usefulness of those
measures for comparative purposes.
STARBUCKS CORPORATION
RECONCILIATION OF SELECTED GAAP
MEASURES TO NON-GAAP MEASURES
(unaudited)
Quarter Ended
Jul 2,2017
Jun 26,2016
Change
Consolidated
Operating income, as reported (GAAP) $ 1,044.2 $ 1,022.3 2.1%
Goodwill and other asset impairments(1) 120.2 — Starbucks Japan
acquisition-related items - other(2) 14.0 14.5 Costs incurred on
sale of Germany retail operations(3) — 2.8 Non-GAAP
operating income $ 1,178.4 $ 1,039.6 13.4%
Operating margin, as reported (GAAP) 18.4 % 19.5 % (110) bps
Goodwill and other asset impairments(1) 2.1 — Starbucks Japan
acquisition-related items - other(2) 0.2 0.3 Costs incurred on sale
of Germany retail operations(3) — 0.1 Non-GAAP
operating margin 20.8 % 19.8 % 100 bps Diluted net earnings
per share, as reported (GAAP) $ 0.47 $ 0.51 (7.8)% Goodwill and
other asset impairments(1) 0.08 — Starbucks Japan
acquisition-related items - other(2) 0.01 0.01 Sale of Germany
retail operations(3) — (0.02 ) Income tax effect on Non-GAAP
adjustments(4) (0.02 ) — Other tax matters(5) — (0.01 )
Non-GAAP net earnings per share $ 0.55 $ 0.49 12.2%
China/Asia
Pacific (CAP)
Operating income, as reported (GAAP) $ 223.8 $ 182.8 22.4%
Starbucks Japan acquisition-related items(2) 13.9 13.8
Non-GAAP operating income $ 237.7 $ 196.6
20.9% Operating margin, as reported (GAAP) 26.6 % 23.8 % 280
bps Starbucks Japan acquisition-related items(2) 1.7 1.8
Non-GAAP operating margin 28.3 % 25.6 % 270 bps
EMEA
Operating income, as reported (GAAP) $ 9.8 $ 29.9 (67.2)% Goodwill
impairment(1) 17.9 — Costs incurred on sale of Germany retail
operations(2) — 2.8 Non-GAAP operating income $ 27.7
$ 32.7 (15.3)% Operating margin, as reported
(GAAP) 3.9 % 10.9 % (700) bps Goodwill impairment(1) 7.2 — Costs
incurred on sale of Germany retail operations(3) — 1.0
Non-GAAP operating margin 11.1 % 12.0 % (90) bps
Quarter Ended
Jul 2,2017
Jun 26,2016
Change
All Other
Segments
Operating income, as reported (GAAP) $ (112.3 ) $ (14.9 ) 653.7%
Goodwill and other asset impairments(1) 102.3 —
Non-GAAP operating income $ (10.0 ) $ (14.9 ) (32.9)%
Operating margin, as reported (GAAP) (111.9 )% (13.5 )% (9,840) bps
Goodwill and other asset impairments(1) 101.9 % — Non-GAAP
operating margin (10.0 )% (13.5 )% 350 bps
(1) Represents goodwill impairment and
other asset impairment charges of $69.3 million and $33.0 million,
respectively, associated with our Teavana-branded stores within our
All Other Segments and goodwill impairment of $17.9 million related
to our Switzerland retail business within our EMEA segment.
(2) Includes ongoing amortization expense
of acquired intangible assets and transaction and integration
costs, such as incremental information technology (“IT”) and
compensation-related costs associated with the acquisition.
(3) Represents the net gain on the sale of
our Germany retail operations, which occurred in Q3 FY16. The net
gain was subsequently adjusted for estimated indemnifications
associated with the sale.
(4) Income tax effect on non-GAAP
adjustments was determined based on the nature of the underlying
items and their relevant jurisdictional tax rates.
(5) Other tax matters include the
incremental benefit from additional domestic manufacturing
deductions claimed in our U.S. consolidated tax returns for periods
prior to Q3 FY16.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170727006446/en/
Starbucks CorporationInvestor Relations:Tom Shaw,
206-318-7118investorrelations@starbucks.comorMedia:Alisha
Damodaran, 206-318-7100press@starbucks.com
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