Starbucks: Reports Record Q1/2012 Results

Seattle / WA. (sc) Starbucks Corporation reported financial results for its 13-week fiscal first quarter ended January 01, 2012. Results are presented under the new reporting segments, which were effective with the beginning of fiscal 2012. Q1/2012 Highlights:

  • Total net revenues increased 16 percent to a record 3,4 billion USD
  • Global comparable store sales increased nine percent, driven by a seven percent increase in traffic and a two percent increase in average ticket
  • Starbucks opened 241 net new stores globally, reaching 500 stores in both mainland China and Latin America
  • CPG revenue increased 72 percent, driven by the launch of Starbucks- and Tazo-branded K-Cup packs and the impact of the Q2/FY11 transition of packaged coffee and tea to the direct distribution model
  • EPS increased eleven percent to a record 0,50 USD per share, compared to 0,45 USD per share in Q1/2011

«Starbucks continues to expand our global footprint and accelerate the innovation and momentum in our CPG business», said Howard Schultz, Starbucks chairman, president and ceo. «Our first quarter performance represents the highest quarterly earnings in the history of the company and is a testament to the hard work and commitment of our 200’000 partners (employees) around the world. Starbucks is firing on all cylinders and taking full advantage of the many global opportunities that lie ahead», Schultz added.

«Our first quarter results demonstrate the fundamental strength of the Starbucks business and the powerful momentum we carried into fiscal 2012», commented Troy Alstead, cfo. «A very successful holiday season drove strong global same store sales, which, combined with continued operational efficiencies, delivered record results despite continued commodity cost pressures. We are well positioned to continue to drive strong revenue and profit growth throughout this year and in years to come».

First Quarter Fiscal 2012 Summary

Consolidated net revenues reached a record 3,4 billion USD in Q1/2012, an increase of 16 percent over Q1/2011. The increase was primarily due to a nine percent increase in global comparable stores sales and 72 percent growth in the CPG segment. The nine percent increase in comparable store sales was comprised of a seven percent increase in the number of transactions and a two percent increase in average ticket. Additionally, licensed store revenue growth of 21 percent contributed to overall consolidated net revenues. Consolidated operating income increased to 556,0 million USD in Q1/2012, compared to 501,9 million USD for the same period a year ago. Operating margin decreased 80 basis points to 16,2 percent in Q1/2012 compared to 17,0 percent in the prior-year period. This margin contraction was due to higher commodity costs. The increase in commodity costs, primarily coffee, negatively impacted Q1/2012 operating income and operating margin by approximately 105 million USD and 300 basis points, respectively, compared to the same period in the prior year.

Q1 EMEA Segment Results

Net revenues for the EMEA segment were 303,0 million USD in Q1/2012, an increase of 17 percent over Q1/2011. The increase was due to an increase in company-operated store revenues, primarily driven by incremental revenues from the consolidation of the Switzerland and Austria markets. Operating income decreased to 19,8 million USD in Q1/2012, compared to 25,2 million USD for the same period a year ago. Operating margin was 6,5 percent in Q1/2012 compared to 9,7 percent in the prior-year period. The margin contraction was primarily driven by higher distribution costs related to the transition to a consolidated distribution center in the UK.

Q1 China/Asia-Pacific (CAP) Segment Results

Net revenues for the China/Asia-Pacific segment were 166,9 million USD in Q1/2012, an increase of 38 percent over Q1/2011. The increase was due to incremental revenues from 85 net new company-operated store openings over the last twelve months and a 20 percent increase in comparable store sales. The 20 percent increase in comparable stores sales was the result of a 15 percent increase in the number of transactions and a five percent increase in average ticket. Operating income increased to 57,8 million USD in Q1/2012, compared to 46,0 million USD for the same period a year ago. Operating margin was 34,6 percent in Q1/2012 compared to 38,1 percent in the prior-year period. The margin contraction was primarily driven by higher performance-based compensation, higher operating expenses in support of the continued expansion of the region and higher commodity costs.

Q1 Global Consumer Products Group Segment Results

CPG net revenues were 335,8 million USD in Q1/2012, an increase of 72 percent over Q1/2011. The increase was primarily due to sales of Starbucks- and Tazo-branded K-Cup portion packs and the benefit of recognizing the full revenue from packaged coffee and tea sales under the direct distribution model. CPG operating income was 79,7 million USD in Q1/2012 compared to 71,1 million USD for the same period a year ago. Operating margin was 23,7 percent in Q1/2012 compared to 36,4 percent in the prior-year period. The margin contraction was primarily due to higher coffee costs.

Fiscal 2012 Targets

Starbucks continues to target the opening of approximately 800 net new stores globally. Approximately 400 net new stores in the Americas, with licensed stores comprising approximately one-half of the new additions. Approximately 300 net new stores in China and Asia Pacific, with licensed stores comprising approximately two-thirds of the new additions. One-half of the China and Asia Pacific new stores are planned for China. Approximately 100 net new stores in EMEA (Europe, Middle East, Russia and Africa), with licensed stores comprising approximately two-thirds of the new stores. The company continues to target approximately ten percent revenue growth, driven by mid-single-digit comparable store sales growth, 800 net new store openings and strong growth in the CPG business. Starbucks is maintaining its full-year operating margin improvement target of 50 to 100 basis points over FY-2011 non-GAAP results on a consolidated basis. The company continues to expect commodity costs will add approximately 230 million USD of cost pressure to FY-2012, with the majority expected to impact the first half of the year. Given the strong Q1/2012 results, the company has raised its expectation for earnings per share to a range of 1,78 USD to 1,82 USD, representing 17 percent to 20 percent growth over the 1,52 USD EPS in FY-2011, excluding the non-routine gains. EPS growth is expected to be approximately ten percent in the first half of FY-2012 and approximately 25 percent in the second half of FY-2012, reflecting the expected distribution of unfavourable commodity cost impact throughout the year.