13 October 2024
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Starbucks: Delivers Record Q1 Revenues and EPS

Seattle / WA. (sc) Starbucks Corporation reported financial results for its 13-week fiscal first quarter ended December 27, 2015. Fiscal 2016 and fiscal 2015 GAAP results include items which are excluded from non-GAAP results.

Q1 Fiscal 2016 Highlights:

  • Global comparable store sales increased 8 percent, including a 4 percent increase in traffic
    • Americas comp store sales increased 9 percent, including a 4 percent increase in traffic
    • China/Asia Pacific comp store sales increased 5 percent, driven by a 4 percent increase in traffic
    • EMEA comp store sales increased 1 percent, driven by a 1 percent increase in traffic
  • Consolidated net revenues grew 12 percent over Q1/2015, to a record 5.4 billion USD
  • Consolidated GAAP operating income increased 16 percent over Q1/2015, to a record 1.1 billion USD
    • Non-GAAP operating income increased 15 percent over Q1/2015 non-GAAP, to a record 1.1 billion USD
  • Consolidated GAAP operating margin increased 60 basis points over Q1/2015, to a Q1 record 19.7 percent
    • Non-GAAP operating margin expanded 40 basis points over Q1/2015 non-GAAP, to a Q1 record 19.9 percent
  • GAAP EPS of 0.46 USD versus Q1/2015 GAAP EPS of 0.65 USD
    • Non-GAAP EPS increased 15 percent over Q1/2015 non-GAAP, to a record 0.46 USD
  • Opened 528 net new stores in the quarter globally, including a record 281 stores in China/Asia Pacific and a record 79 stores in EMEA
  • Channel Development revenues increased 16 percent; operating margin expanded 210 basis points and operating income increased 23 percent over Q1/2015
  • Company served over 23 million more customer occasions from its global comp store base – 18 million in the U.S. – in Q1 over the prior year
  • Record 1.9 billion USD loaded on Starbucks Cards in the U.S. and Canada; 1 in 6 American adults received a Starbucks Card over Holiday, up from 1 in 7 in Q1/2015
  • Membership in the company’s My Starbucks Rewards loyalty program increased 23 percent; the company now has more than 11 million active members in the U.S.

«Starbucks record Q1 2016 financial and operating results, highlighted by comp sales increases of 9 percent in the U.S., 8 percent globally, another 4 percent increase in global traffic – and record performance from our Channel Development segment – underscore the accelerating strength and relevance of the Starbucks brand around the world», said Howard Schultz, Starbucks chairman and ceo. «Successful retail, CPG, digital, mobile, loyalty, card and investment strategies are combining to accelerate our revenue growth and drive significant margin expansion and EPS leverage».

«We have entered fiscal 2016 with another record-breaking quarter and a continuation of the accelerating momentum we saw in our business throughout 2015», said Scott Maw, Starbucks cfo. «The investments we are making in our people and our business are driving record, industry leading operating and financial performance and consistently strong comp growth, and are both paying off today and setting us up for continued strong performance into the future».

First Quarter Fiscal 2016 Summary

Comparable Store Sales (1) Sales Growth Change in Transactions Change in Ticket
Consolidated (2) 8 percent 4 percent 4 percent
Americas 9 percent 4 percent 5 percent
CAP(2) 5 percent 4 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.

 

Operating Results Q1/2016 Q1/2015 Change
Net New Stores 528 512 16
Revenues 5,373.5 million USD 4,803.2 million USD 12 percent
Operating Income 1,058.0 million USD 915.5 million USD 16 percent
Operating Margin 19.7 percent 19.1 percent 60 bps
EPS 0.46 USD 0.65 USD (29) percent

 
Consolidated net revenues were 5.4 billion USD in Q1/2016, an increase of 12 percent over Q1/2015. The increase was primarily driven by an 8 percent increase in global comparable store sales and the opening of 1,693 net new stores over the past 12 months.

Consolidated operating income grew 16 percent to 1,058.0 million USD in Q1/2016, up from 915.5 million USD in Q1/2015. Consolidated operating margin expanded 60 basis points to 19.7 percent. The increase was primarily due to sales leverage and was partially offset by investments in our partners (employees) and digital platforms.

Q1 Americas Segment Results

Q1/2016   Q1/2015   Change
Net New Stores 171 210 (39)
Revenues 3,726.2 million USD 3,366.9 million USD 11 percent
Operating Income 934.6 million USD 817.5 million USD 14 percent
Operating Margin 25.1 percent 24.3 percent 80 bps

 
Net revenues for the Americas segment were 3.7 billion USD in Q1/2016, an increase of 11 percent over Q1/2015. The increase was driven by a 9 percent increase in comparable store sales and incremental revenues from 573 net new store openings over the past 12 months.

Operating income of 934.6 million USD in Q1/2016 grew 14 percent versus 817.5 million USD in Q1/2015. Operating margin of 25.1 percent expanded 80 basis points due to sales leverage and savings in cost of sales, primarily dairy, and was partially offset by investments in our partners (employees) and digital platforms.

Q1 China/Asia Pacific Segment Results

Q1/2016   Q1/2015   Change
Net New Stores 281 234 47
Revenues 653.6 million USD 495.8 million USD 32 percent
Operating Income 127.1 million USD 108.3 million USD 17 percent
Operating Margin 19.4 percent 21.8 percent (240) bps

 
Net revenues for the China/Asia Pacific segment grew 32 percent over Q1/2015 to 653.6 million USD in Q1/2016. The increase was primarily driven by incremental revenues from the acquisition of Starbucks Japan during Q1/2015. Also contributing were incremental revenues from 885 net new store openings over the past 12 months and a 5 percent increase in comparable store sales.

Operating income grew 17 percent over Q1/2015 to 127.1 million USD in Q1/2016. Operating margin declined 240 basis points to 19.4 percent primarily due to the impact of our ownership change in Starbucks Japan, which drove a 330 basis point decline. The remaining 90 basis point expansion was primarily due to sales leverage and higher income from our joint venture operations, and was partially offset by increased store operating expenses related to higher compensation and benefits.

Q1 EMEA Segment Results

Q1/2016   Q1/2015   Change
Net New Stores 79 58 21
Revenues 313.0 million USD 333.3 million USD (6) percent
Operating Income 48.1 million USD 50.0 million USD (4) percent
Operating Margin 15.4 percent 15.0 percent 40 bps

 
Net revenues for the EMEA segment were 313.0 million USD in Q1/2016, a 6 percent decrease versus Q1/2015. The decrease was primarily due to unfavorable foreign currency translation and the shift in the portfolio towards more licensed stores. Partially offsetting the decrease were incremental revenues from the opening of 263 net new licensed stores over the past 12 months.

Operating income decreased 4 percent to 48.1 million USD in Q1/2016, down from 50 million USD in Q1/2015. Operating margin expanded 40 basis points to 15.4 percent, primarily driven by gains on the sales of certain store assets in the region which were partially offset by higher cost of sales in our licensed stores operations and lower sales from our company-operated stores business.

Q1 Channel Development Segment Results

Q1/2016   Q1/2015   Change
Revenues 512.1 million USD 442.6 million USD 16 percent
Operating Income 193.3 million USD 157.5 million USD 23 percent
Operating Margin 37.7 percent 35.6 percent 210 bps

 
Net revenues for the Channel Development segment grew 16 percent over Q1/2015 to 512.1 million USD in Q1/2016, primarily driven by increased sales of premium single-serve products. Also contributing to the increase were higher foodservice and packaged coffee sales. Operating income of 193.3 million USD in Q1/2016 increased 23 percent compared to Q1/2015. Operating margin increased 210 basis points to 37.7 percent, primarily driven by higher income from our North American Coffee Partnership and leverage on cost of sales.

Q1 All Other Segments Results

Q1/2016   Q1/2015   Change
Net New Stores (3) 10 (13)
Revenues 168.6 million USD 164.6 million USD 2 percent
Operating Income 5.9 million USD 10.2 million USD (42) percent

 

Fiscal 2016 Targets

Starbucks fiscal year 2016 will include an extra week in the fourth quarter, as fiscal 2016 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.

  • 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: expected to be flat to down slightly versus prior year
    • EMEA: expected to approach 15 percent
    • Channel Development: expect moderate improvement versus prior year
  • Expecting a consolidated tax rate between 34 percent and 35 percent
  • Full year FY16 earnings per share, including the 53rd week in Q4 FY16:
    • GAAP EPS in the range of 1.84 USD to 1.86 USD
    • Non-GAAP EPS in the range of 1.87 USD to 1.89 USD
  • Introduced – Q2 FY16 earnings per share:
    • GAAP EPS in the range of 0.37 USD to 0.38 USD
    • Non-GAAP EPS in the range of 0.38 USD to 0.39 USD
  • Capital expenditures of approximately 1.4 billion USD

Company Updates

  • The company elected Mary Dillon, CEO of Ulta Beauty, to its Board of Directors on January 4; she will serve on the Board’s Compensation and Management Development Committee.
  • Starbucks and long-time strategic partner Hong Kong Maxim’s Group together opened the first Starbucks store in Cambodia in Q1; the company also opened its first two locations in Kazakhstan in the quarter, in collaboration with strategic licensing partner Alshaya. The company now operates in 70 countries worldwide.
  • In December, the company launched Starbucks Delivery by Postmates, a pilot program in collaboration with leading on-demand delivery service Postmates, where customers can have Starbucks food or beverages delivered to them within designated areas in Seattle.
  • Starbucks extended its successful Mobile Order & Pay program to Vancouver, B.C. in January, allowing customers to pre-order their favorite beverages and food in over 130 locations in the city.
  • The company announced a number of new market-leading initiatives in its China market – in addition to existing pay and benefits programs – including a monthly housing allowance subsidy and the Career Coffee Break (sabbatical) benefit.
  • Starbucks hosted the second «Opportunity Fair and Forum» in the quarter, together with the 100,000 Opportunities Initiative in Phoenix where more than 500 job offers were given to «opportunity youth» by the 25 companies in attendance. In addition, Starbucks Canada committed 10 percent of its store hires to opportunity youth and will further create 600 work placements for Non-Job-Ready Youth over the next three years.
  • The company announced an enhancement to its Starbucks College Achievement Plan whereby partners who are current or former members of the U.S. Armed Forces may extend 100 percent tuition reimbursement to a spouse or child through the program.
  • The company repurchased 4.5 million shares of common stock in Q1/2016; 48 million shares remain available for purchase under current authorizations.
  • The Board of Directors declared a cash dividend of 0.20 USD per share, payable on February 19, 2016 to shareholders of record as of February 04, 2016.

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