Seattle / WA. (sc) Starbucks Corporation reported financial results for its 13-week fiscal second quarter and 26-week fiscal year to date ended March 27, 2016.
Q2 Fiscal 2016 Highlights:
- Global comparable store sales increased 6 percent, comprised of a 4 percent increase in ticket and 2 percent increase in traffic
- Consolidated net revenues grew 9 percent to a Q2 record 5.0 billion USD
- Consolidated GAAP operating income increased 11 percent to a Q2 record 864 million USD
- Non-GAAP operating income increased 11 percent over Q2 FY15 non-GAAP, to a Q2 record 878 million USD
- Consolidated GAAP operating margin increased 30 basis points to a Q2 record 17.3 percent
- Non-GAAP operating margin expanded 30 basis points over Q2 FY15 non-GAAP, to a Q2 record 17.6 percent
- EPS increased 18 percent to a Q2 record 0.39 USD per share
- The company opened 350 net new stores globally, bringing total stores to 23’921 worldwide at the end of Q2
- Starbucks served nearly 16 million more customer occasions from its global comp store base – and over 12 million more customer occasions in the U.S. – in Q2 FY16 compared to Q2 FY15
- Membership in the company’s Starbucks Rewards loyalty program increased 16 percent year-over-year and 8 percent in Q2 versus Q1 FY16; company now has 12 million active loyalty members in the U.S.
- Mobile Order and Pay usage doubled year-over-year; company now processing 8 million Mobile Order and Pay transactions per month
«Starbucks record Q2 financial and operating performance – including a stunning 18 percent increase in revenues and a 5 percent increase in transactions in China – underscores the strength of the Starbucks brand and the resiliency of our global retail and CPG businesses», said Howard Schultz, chairman and ceo. «Loyalty, technology and innovation are continuing to fuel our digital flywheel and propel our business forward all around the world».
«Starbucks Q2 represented another quarter of solid growth, with the highest revenues of any non-holiday quarter in our history and excellent financial, operating and profit performance», said Scott Maw, cfo. «The record-setting performance we delivered in the first half of fiscal 2016 ideally positions us to benefit from the investments we are making in our partners, in our stores and in groundbreaking innovation, and to continue delivering world class returns to our shareholders into the future».
Second Quarter Fiscal 2016 Summary
| Quarter Ended Mar 27, 2016 | |||||||||
| Comparable Store Sales(1) | Sales Growth | Change in Transactions | Change in Ticket | ||||||
| Consolidated(2) | 6 | percent | 2 | percent | 4 | percent | |||
| Americas | 7 | percent | 3 | percent | 5 | percent | |||
| CAP(2) | 3 | percent | 2 | percent | 2 | percent | |||
| EMEA | 1 | percent | 0 | percent | 1 | percent | |||
(1) Includes only Starbucks company-operated stores open 13 months or longer.
(2) Beginning in December of fiscal 2016, comparable store sales include the results of the 1’009 company-operated stores acquired as part of the acquisition of Starbucks Japan in the first quarter of fiscal 2015.
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| Operating Results | Quarter Ended | ||||||||||
| (USD in millions, except per share amounts) | Mar 27, 2016 | Mar 29, 2015 | Change | ||||||||
| Net New Stores(1) | 350 | 210 | 140 | ||||||||
| Revenues | USD | 4’993.2 | USD | 4’563.5 | 9 | percent | |||||
| Operating Income | USD | 864.2 | USD | 777.5 | 11 | percent | |||||
| Operating Margin | 17.3 | percent | 17.0 | percent | 30 bps | ||||||
| EPS | USD | 0.39 | USD | 0.33 | 18 | percent | |||||
(1) Net new stores include the closure of 132 Target Canada licensed stores in the second quarter of fiscal 2015.
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Consolidated net revenues were 5.0 billion USD in Q2 FY16, an increase of 9 percent over Q2 FY15. The increase was primarily driven by a 6 percent increase in global comparable store sales and the opening of 1’833 net new stores over the past 12 months.
Consolidated operating income grew 11 percent to 864.2 million USD in Q2 FY16, up from 777.5 million USD in Q2 FY15. Consolidated operating margin expanded 30 basis points to 17.3 percent. The increase was primarily due to sales leverage and was partially offset by investments in our partners (employees) and digital platforms.
Q2 Americas Segment Results
| (USD in millions) | Q2/2016 | Q2/2015 | Change | ||||||||
| Net New Stores(1) | 132 | (2 | ) | 134 | |||||||
| Revenues | USD | 3’455.6 | USD | 3’128.0 | 10 | percent | |||||
| Operating Income | USD | 812.0 | USD | 709.6 | 14 | percent | |||||
| Operating Margin | 23.5 | percent | 22.7 | percent | 80 bps | ||||||
(1) Net new stores include the closure of 132 Target Canada licensed stores in the second quarter of fiscal 2015.
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Net revenues for the Americas segment were 3.5 billion USD in Q2 FY16, an increase of 10 percent over Q2 FY15. The increase was driven by a 7 percent increase in comparable store sales and incremental revenues from 707 net new store openings over the past 12 months.
Operating income of 812.0 million USD in Q2 FY16 grew 14 percent versus 709.6 million USD in Q2 FY15. Operating margin of 23.5 percent expanded 80 basis points due to sales leverage and was partially offset by investments in our partners (employees) and digital platforms.
Q2 China/Asia Pacific Segment Results
| (USD in millions) | Q2/2016 | Q2/2015 | Change | ||||||||
| Net New Stores | 175 | 176 | (1 | ) | |||||||
| Revenues | USD | 677.9 | USD | 595.2 | 14 | percent | |||||
| Operating Income | USD | 129.3 | USD | 112.4 | 15 | percent | |||||
| Operating Margin | 19.1 | percent | 18.9 | percent | 20 bps | ||||||
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Net revenues for the China/Asia Pacific segment grew 14 percent over Q2 FY15 to 677.9 million USD in Q2 FY16. The increase was primarily driven by incremental revenues from 884 net new store openings over the past 12 months. A 3 percent increase in comparable store sales also contributed.
Operating income grew 15 percent over Q2 FY15 to 129.3 million USD in Q2 FY16. Operating margin expanded 20 basis points to 19.1 percent primarily due to sales leverage and higher income from our joint venture operations. The expansion was partially offset by the impact of foreign currency and increased store operating expenses related to higher compensation and benefits.
Q2 EMEA Segment Results
| (USD in millions) | Q2/2016 | Q2/2015 | Change | ||||||||
| Net New Stores | 47 | 35 | 12 | ||||||||
| Revenues | USD | 268.3 | USD | 280.3 | (4 | ) percent | |||||
| Operating Income | USD | 27.6 | USD | 29.2 | (5 | ) percent | |||||
| Operating Margin | 10.3 | percent | 10.4 | percent | (10) bps | ||||||
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Net revenues for the EMEA segment were 268.3 million USD in Q2 FY16, a 4 percent decrease versus Q2 FY15. The decrease was primarily due to the shift in the portfolio towards more licensed stores and unfavorable foreign currency translation. Partially offsetting the decrease were incremental revenues from the opening of 273 net new licensed stores over the past 12 months.
Operating income decreased 5 percent to 27.6 million USD in Q2 FY16, down from 29.2 million USD in Q2 FY15. Operating margin declined 10 basis points to 10.3 percent, primarily driven by gains on the sale of certain store assets in the prior year.
Q2 Channel Development Segment Results
| (USD in millions) | Q2/2016 | Q2/2015 | Change | ||||||||
| Revenues | USD | 461.2 | USD | 428.0 | 8 | percent | |||||
| Operating Income | USD | 182.0 | USD | 156.1 | 17 | percent | |||||
| Operating Margin | 39.5 | percent | 36.5 | percent | 300 bps | ||||||
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Net revenues for the Channel Development segment grew 8 percent over Q2 FY15 to 461.2 million USD in Q2 FY16, primarily driven by increased sales of premium single-serve products. Also contributing to the increase were higher foodservice sales.
Operating income of 182.0 million USD in Q2 FY16 increased 17 percent compared to Q2 FY15. Operating margin increased 300 basis points to 39.5 percent, primarily driven by leverage on cost of sales and lower coffee costs. Higher income from the North American Coffee Partnership also contributed to the increase.
Q2 All Other Segments Results
| (USD in millions) | Q2/2016 | Q2/2015 | Change | ||||||||
| Net New Stores | (4 | ) | 1 | (5 | ) | ||||||
| Revenues | USD | 130.2 | USD | 132.0 | (1 | ) percent | |||||
| Operating Loss | USD | (19.2 | ) | USD | (4.1 | ) | 368 | percent | |||
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Year to Date Financial Results
| Two Quarters Ended Mar 27, 2016 | |||||||||
| Comparable Store Sales(1) | Sales Growth | Change in Transactions | Change in Ticket | ||||||
| Consolidated(2) | 7 | percent | 3 | percent | 4 | percent | |||
| Americas | 8 | percent | 3 | percent | 5 | percent | |||
| CAP(2) | 4 | percent | 2 | percent | 2 | percent | |||
| EMEA | 1 | percent | 1 | percent | 0 | percent | |||
(1) Includes only Starbucks company-operated stores open 13 months or longer.
(2) Beginning in December of fiscal 2016, comparable store sales include the results of the 1’009 company-operated stores acquired as part of the acquisition of Starbucks Japan in the first quarter of fiscal 2015.
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| Operating Results | Two Quarters Ended | ||||||||||
| (USD in millions, except per share amounts) | Q2/2016 | Q2/2015 | Change | ||||||||
| Net New Stores (1) | 878 | 722 | 156 | ||||||||
| Revenues | USD | 10’366.8 | USD | 9’366.8 | 11 | percent | |||||
| Operating Income | USD | 1’922.3 | USD | 1’693.1 | 14 | percent | |||||
| Operating Margin | 18.5 | percent | 18.1 | percent | 40 bps | ||||||
| EPS | USD | 0.84 | USD | 0.97 | (13 | ) percent | |||||
(1) Net new stores include the closure of 132 Target Canada licensed stores in the second quarter of fiscal 2015.
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Fiscal 2016 Targets
Starbucks fiscal year 2016 will include an extra week in the fourth quarter, because it is a 53-week year for the company.
The company reiterates the following FY16 targets, unless otherwise noted. FY16 targets are based on actual FY15 non-GAAP results and projected FY16 non-GAAP results as noted. Projected FY16 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.
- Approximately 1’800 net new store openings in the fiscal year:
- Americas: approximately 700, half licensed
- China/Asia Pacific: approximately 900, two-thirds licensed
- EMEA: approximately 200, primarily licensed
- Full year consolidated revenue growth of 10 percent+ on a 52 week basis, the 53rd week expected to add approximately 2 percent
- Global comparable store sales growth somewhat above mid-single digits
- FY16 operating margin is expected to increase slightly versus prior year:
- Americas: expect moderate improvement over prior year
- China/Asia Pacific: now expected to be roughly flat to prior year
- EMEA: expected to approach 15 percent
- Channel Development: expect moderate improvement versus prior year
- Consolidated tax rate now expected to be approximately 34 percent (from a range of 34 percent – 35 percent)
- Full year FY16 earnings per share, including the 53rd week in Q4 FY16:
- GAAP EPS now expected to be in the range of 1.85 USD to 1.86 USD (from a range of 1.84 USD to 1.86 USD)
- Non-GAAP EPS now expected to be in the range of 1.88 USD to 1.89 USD (from a range of 1.87 USD to 1.89 USD)
- Introduced – Q3 FY16 earnings per share:
- GAAP EPS in the range of 0.47 USD to 0.48 USD
- Non-GAAP EPS in the range of 0.48 USD to 0.49 USD
- Capital expenditures of approximately 1.4 billion USD
Company Updates
- On April 20th, Starbucks announced an agreement with AmRest Holdings SE in which AmRest will acquire Starbucks company-operated retail stores in Germany. The deal is expected to close during Q3 FY16. AmRest currently operates multiple businesses in several central and eastern European markets, including over 100 licensed Starbucks locations in the Czech Republic, Poland, Hungary, Bulgaria and Romania.
- Starbucks announced a new licensed partnership with Percassi in February, to own and operate Starbucks stores in Italy. The first store is expected to open in Milan in 2017. Also in February, the company announced plans to open its first location in Trinidad and Tabago in 2016, its fifth market in the Caribbean region, in exclusive partnership with Prestige Holdings Limited.
- In February, the company announced an update to its loyalty program, which levels the playing field for customers who now earn 2 stars for every 1 USD spent, no matter how often they visit or what they purchase. The new Starbucks Rewards program became effective April 12th.
- On April 5th, the company announced that its second Roastery location will be in New York City, in the heart of the Meatpacking District at 61 Ninth Avenue. Scheduled to open in 2018, this location will be inspired by the first Starbucks Reserve® Roastery and Tasting Room, which debuted in December 2014 in the company’s hometown of Seattle, Washington.
- Starbucks hosted its 24th Annual Meeting of Shareholders on March 23rd, where it highlighted the company’s record FY15 financial achievements and introduced the company’s next level of social impact initiatives – which include commitments in support of coffee farming communities, feeding the hungry, and increasing participation in U.S. local and national elections.
- On February 4th, Starbucks completed a public offering of 500 million USD in aggregate principal amount of 2.100 percent Senior Notes due 2021; as previously disclosed, the company intends to use the proceeds from the offering for general corporate purposes.
- The company repurchased 23 million shares of common stock in Q2 FY16; the company’s Board of Directors has authorized an additional 100 million shares for repurchase under its ongoing share repurchase program. With the additional 100 million shares, the company now has 125 million shares available for repurchase.
- The Board of Directors declared a cash dividend of 0.20 USD per share, payable on May 20, 2016 to shareholders of record as of May 05, 2016.
