Starbucks: Reports Record Q4 and FY 2015 Results

Seattle / WA. (sc) Starbucks Corporation reported financial results for its 13-week fiscal fourth quarter and 52-week fiscal year ended September 27, 2015. Fiscal 2014 and fiscal 2015 GAAP results include items which are excluded from non-GAAP results.
 

Q4 Fiscal 2015 Highlights

  • Global comparable store sales increased eight percent, driven by a four percent increase in traffic
    • Americas comp sales increased eight percent, driven by a four percent increase in traffic
    • China/Asia Pacific comp sales increased six percent, driven by a six percent increase in traffic
    • EMEA comp sales increased five percent, driven by a three percent increase in traffic
  • Consolidated net revenues up 18 percent over Q4/2014, to 4.9 billion USD
  • Consolidated GAAP operating income up 13 percent, to 969.4 million USD
    • Non-GAAP operating income up 14 percent over Q4/2014 non-GAAP operating income, to 981.3 million USD
  • Consolidated GAAP operating margin of 19.7 percent decreased 70 basis points from Q4/2014
    • Non-GAAP operating margin of 20.0 percent decreased 50 basis points from Q4/2014 non-GAAP operating margin
  • GAAP EPS of 0.43 USD up ten percent over Q4/2014 GAAP EPS
    • Non-GAAP EPS of 0.43 USD up 16 percent over Q4/2014 non-GAAP EPS
  • Starbucks Mobile Order + Pay expanded to U.S. company-operated stores nationwide; became available on Android devices through the Starbucks® mobile app
  • Opened 524 net new stores globally in the quarter, including the first Starbucks stores in Panama and in Azerbaijan

 

Fiscal Year 2015 Highlights

  • Global comparable store sales increased seven percent, driven by a three percent increase in traffic
    • Americas comp sales increased seven percent, driven by a three percent increase in traffic
    • China/Asia Pacific comp sales increased nine percent, driven by an eight percent increase in traffic
    • EMEA comp sales increased four percent, driven by a two percent increase in traffic
  • Consolidated net revenues up 17 percent over FY-2014, to a record 19.2 billion USD
  • Consolidated GAAP operating income up 17 percent over FY-2014, to 3.6 billion USD
    • Non-GAAP operating income up 19 percent over FY-2014 non-GAAP operating income, to 3.7 billion USD
  • Consolidated GAAP operating margin increased ten basis points over FY-2014, to 18.8 percent
    • Non-GAAP operating margin increased 50 basis points over FY-2014 non-GAAP operating margin, to 19.1 percent
  • GAAP EPS of 1.82 USD increased 35 percent over FY-2014 GAAP EPS
    • Non-GAAP EPS of 1.58 USD increased 19 percent over FY-2014 non-GAAP EPS
  • Company served over 60 million more customer occasions from its U.S. comp store base, and over 72 million more customer occasions from its global comp store base in fiscal 2015 over the prior year
  • Starbucks opened 1'677 net new stores in fiscal 2015, ending the year with 23'043 stores in 68 countries

«Starbucks record Q4 financial results, highlighted by stunning comp store sales increases of eight percent globally, nine percent in the U.S. driven by a four percent increase in global traffic, demonstrate the strength and relevance of the Starbucks brand around the world», said Howard Schultz, Starbucks chairman and ceo. «And our results underscore the success of the investments we continue to make in our people and business, in new beverage and food innovation and in groundbreaking technology innovation that is deepening our connection to customers everywhere», Schultz added. «Starbucks performance in Q4 reflected a continuation of the pattern of accelerating momentum we saw with each successive quarter of fiscal 2015», said Scott Maw, Starbucks cfo. «And our Q4 results are particularly gratifying in that they were achieved despite the increase, and acceleration, of the significant partner and digital investments we are making to drive sustained, profitable growth around the world and into the future», Maw added.
 

Fourth Quarter Fiscal 2015 Summary (Ended 2015-09-27)

Comparable Store Sales(1)   Sales Growth   Change in Transactions   Change in Ticket
Consolidated 8% 4% 4%
Americas 8% 4% 5%
CAP 6% 6% 0%
EMEA 5% 3% 3%
[1] Includes only Starbucks company-operated stores open 13 months or longer.

 

Operating Results

  Q4/2015   Q4/2014   Change
Net New Stores 524 503 21
Revenues 4'914.8 4'180.8 18%
Operating Income 969.4 million USD 854.9 million USD 13%
Operating Margin 19.7% 20.4% (70) bps
EPS 0.43 USD 0.39 USD 10%

 

Consolidated net revenues were 4.9 billion USD in Q4/2015, an increase of 18 percent over Q4/2014. The increase was primarily driven by incremental revenues from the acquisition of Starbucks Japan, an eight percent increase in global comparable store sales and the opening of 1'606 net new stores over the past twelve months. Consolidated operating income grew 13 percent to 969.4 million USD in Q4/2015, up from 854.9 million USD in Q4/2014. Consolidated operating margin decreased 70 basis points to 19.7 percent primarily driven by investments in our store partners (employees) in the Americas segment and the impact of our ownership change in Starbucks Japan, and was partially offset by sales leverage.
 

Q4 Americas Segment Results

  Q4/2015   Q4/2014   Change
Net New Stores 233 279 (46)
Revenues 3'383.8 million USD 3'041.1 million USD 11%
Operating Income 840.6 million USD 743.0 million USD 13%
Operating Margin 24.8% 24.4% 40 bps

 

Net revenues for the Americas segment were 3.4 billion USD in Q4/2015, an increase of eleven percent over Q4/2014. The increase was driven by eight percent growth in comparable store sales and incremental revenues from 612 net new store openings over the past twelve months. Operating income of 840.6 million USD in Q4/2015 grew 13 percent versus 743.0 million USD in Q4/2014. Operating margin of 24.8 percent expanded 40 basis points due to sales leverage and was partially offset by investments in our store partners (employees).
 

Q4 China/Asia Pacific Segment Results

  Q4/2015   Q4/2014   Change
Net New Stores 223 199 24
Revenues 652.2 million USD 309.9 million USD 110%
Operating Income 129.8 million USD 103.8 million USD 25%
Operating Margin 19.9% 33.5% (1'360) bps

 

Net revenues for the China/Asia Pacific segment grew 110 percent over Q4/2014 to 652.2 million USD in Q4/2015. The increase was primarily driven by incremental revenues from the acquisition of Starbucks Japan. Also contributing were incremental revenues from 767 net new store openings over the past twelve months and a six percent increase in comparable store sales. Operating income grew 25 percent over Q4/2014 to 129.8 million USD in Q4/2015. Operating margin declined 1'360 basis points to 19.9 percent due to the impact of our ownership change in Starbucks Japan, which drove a 1'550 basis point decline. The remaining 190 basis point expansion was primarily driven by operational savings.
 

Q4 EMEA Segment Results

  Q4/2015   Q4/2014   Change
Net New Stores 71 38 33
Revenues 308.3 million USD 321.8 million USD (4)%
Operating Income 53.1 million USD 38.8 million USD 37%
Operating Margin 17.2% 12.1% 510 bps

 

Net revenues for the EMEA segment were 308.3 million USD in Q4/2015, a four percent decrease versus Q4/2014. The decrease was primarily driven by unfavorable foreign currency translation. Partially offsetting the decrease were incremental revenues from the opening of 238 net new licensed stores over the past twelve months and a five percent increase in comparable store sales. Operating income increased 37 percent to 53.1 million USD in Q4/2015, up from 38.8 million USD in Q4/2014. Operating margin expanded 510 basis points to 17.2 percent, primarily due to sales leverage driven by the ongoing shift in the portfolio towards more licensed stores, and the gains on sales of primarily store assets to licensees in the region.
 

Q4 Channel Development Segment Results

  Q4/2015   Q4/2014   Change
Revenues 456.7 million USD 399.1 million USD 14%
Operating Income 197.3 million USD 171.5 million USD 15%
Operating Margin 43.2% 43.0% 20 bps

 

Net revenues for the Channel Development segment grew 14 percent over Q4/2014 to 456.7 million USD in Q4/2015, primarily driven by increased sales of packaged coffee and premium single-serve products. Operating income of 197.3 million USD in Q4/2015 increased 15 percent compared to Q4/2014. Operating margin increased 20 basis points to 43.2 percent, primarily driven by increased income from our North American Coffee Partnership and leverage on cost of sales. The increase was partially offset by higher coffee costs and increased marketing spend.
 

Q4 All Other Segments Results

  Q4/2015   Q4/2014   Change
Net New Stores (3) (13) 10
Revenues 113.8 million USD 108.9 million USD 4%
Operating Loss (17.7) million USD (13.8) million USD 28%

 

Year to Date Financial Results (Ended 2015-09-27)

Comparable Store Sales(1)   Sales Growth   Change in Transactions   Change in Ticket
Consolidated 7% 3% 4%
Americas 7% 3% 4%
CAP 9% 8% 1%
EMEA 4% 2% 1%
[1] Includes only Starbucks company-operated stores open 13 months or longer.

 

Operating Results

  FY 2015   FY 2014   Change
Net New Stores (1) 1'677 1'599 78
Revenues 19'162.7 million USD 16'447.8 million USD 17%
Operating Income 3'601.0 million USD 3'081.1 million USD 17%
Operating Margin 18.8% 18.7% 10 bps
EPS 1.82 USD 1.35 USD 35%
[1] Net new stores include the closure of 132 Target Canada licensed stores in the second quarter of fiscal 2015.

 

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 provides the following FY16 targets, which are based on actual FY-2015 non-GAAP results as presented in this press release and projected FY16 non-GAAP results where 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 ten percent+ on a 52 week basis, the 53rd week expected to add approximately two 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
  • Q1 FY16 Earnings Per Share:
    • GAAP EPS in the range of 0.43 USD to 0.44 USD
    • Non-GAAP EPS in the range of 0.44 USD to 0.45 USD
  • Capital expenditures of approximately 1.4 billion USD

 

Company Updates

  • On October 6, Starbucks announced that Gerri Martin-Flickinger, former Adobe senior executive, had been appointed as chief technology officer effective November 2. Martin-Flickinger will lead the global IT function and play a key role in shaping the technology agenda across the Starbucks business.
  • In its EMEA region, the company announced the following: two new strategic licensing partnerships in Europe; in the first, Starbuckswill partner with REWE, a leading premium German retailer, to open Starbucks stores within REWE-operated hyper and supermarkets in prime city locations across Germany beginning in 2016. In the second, Starbucks will partner with Monoprix to open Starbucks stores within Monoprix stores in France with the first store expected to open before the end of 2015. In addition, the company opened its firstStarbucks store in Azerbaijan, in collaboration with long-time strategic partner Alshaya.
  • Starbucks made the following announcements with respect to its Latin America region: the company opened its first Starbucks store inPanama in August, in partnership with Premium Restaurants of America (PRA), its long-term strategic licensing partner in Central America. Also in August, the company announced that Baristas Del Caribe has acquired exclusive rights to operate Starbucks® stores inPuerto Rico. Starbucks opened its first store in San Juan, Puerto Rico in 2002 and today has 19 stores across the island. In October Starbucks opened its 500th store in Mexico, its largest market in Latin America, with long-term strategic partner Alsea.
  • Building on its 15-year strategic licensing partnership with Hong Kong Maxim’s Group, Starbucks announced plans to open its first location in Cambodia by the end of 2015, representing the company’s 16th market in the fast-growing China/Asia Pacific (CAP) region.
  • In October, Starbucks launched its first Green Apron Delivery service in the Empire State Building in New York City. The pilot project, designed for a dense urban environment, will allow Empire State Building tenants to order from a select menu of food and beverages via a dedicated website. Beverages will then be handcrafted by Starbucks baristas in a designated kitchen within the building and delivered to a designated drop off location.
  • Starbucks Mobile Order + Pay became available on iOS and Android devices in U.S. company-operated stores nationwide on September 22. Following the successful phased launch in the U.S., the company began the international phase of its rollout in approximately 150 London locations in the UK and in approximately 300 Toronto area locations in Canada.
  • The company has selected Chase Commerce Solutions, the global payment processing and merchant acquiring division of JPMorgan Chase + Co., to transition processing of all non-mobile payments and U.S. retail card payment transactions in company-operated stores in addition to partnering on the rollout of chip-enabled payment terminals. Implementation of both services will begin immediately, with complete transition expected by Spring 2016.
  • In September, Moody’s Investors Service upgraded Starbucks senior unsecured ratings to A2 from A3, short-term commercial paper rating to Prime-1 from Prime-2, and senior unsecured shelf to (P)A2 from (P)A3.
  • The company repurchased 29 million shares of common stock in fiscal 2015; nearly 53 million shares remain available for purchase under current authorizations.
  • The Board of Directors declared a cash dividend of 0.20 USD per share, an increase of 25 percent, payable on November 27, 2015 to shareholders of record as of November 12, 2015 (Image: Starbucks).