Starbucks: revenues increase eleven percent in Q3/2014

Seattle / WA. (sc) Starbucks Corporation reported financial results for its 13-week fiscal third quarter and 39-week fiscal year to date ended June 29, 2014. Third quarter highlights:

  • Consolidated net revenue growth accelerated to eleven percent; net revenues totalled a Q3 record 4,2 billion USD
  • Global comparable store sales increased six percent, marking the 18th consecutive quarter of global comp growth of five percent or greater
    • Americas comp sales increased six percent; U.S. comp sales increased seven percent
    • EMEA comp sales increased three percent
    • China/Asia Pacific comp sales increased seven percent
  • Consolidated operating income increased 25 percent, to a Q3 record 769 million USD
  • Consolidated operating margin expanded 200 bps, to a Q3 record 18,5 percent, primarily driven by sales leverage
  • Channel Development revenues increased 13 percent; operating margin expanded 800 bps to 37,1 percent
  • Earnings per share increased 22 percent to a Q3 record 0,67 USD per share
  • The Company opened 344 net new stores globally, ending the quarter with 20’863 stores across 64 countries

Updated Fiscal 2014 Targets

Following the strong performance year-to-date, the company is updating the following fiscal 2014 targets:

  • Consolidated operating margin improvement now targeted at 200 bps over FY-2013, when excluding the Kraft litigation charge in fiscal 2013
    • Channel Development now targeting approximately 600 bps improvement over FY-2013
  • Earnings per share now expected to be in the range of 2,70 USD to 2,72 USD; or 2,65 USD to 2,67 USD when excluding an estimated net benefit of 0,05 USD for certain FY-2014 non-GAAP adjustments.
    • Q4 EPS now in the range of 0,76 USD to 0,78 USD; or 0,73 USD to 0,75 USD when excluding a 0,03 USD estimated net benefit as described in the above referenced reconciliation
  • Net new stores now expected to be approximately 1’550
    • Americas: increased from 600 to 650

Fiscal 2015 Targets

The company introduces initial fiscal 2015 targets as follows:

  • Revenue growth of ten percent or greater
  • Global comparable store sales growth in the mid single digits
  • An additional 1’600 net new stores globally
  • Earnings per share growth of 15 to 20 percent over FY-2014 calculated based on Non-GAAP earnings per share

«Starbucks Q3 represents another quarter of outstanding operating performance in which each of our segments contributed to record results», said Howard Schultz, chairman, president and ceo of Starbucks Coffee Company. «The increasing power of the Starbucks brand, the success of our best-in-class mobile, social and digital technologies and our greatest asset – over 300’000 partners who deliver the Starbucks Experience to over 70 million customers around the world each week – position us to continue growing our business around the world and into the future».

«Starbucks record Q3 results demonstrate both the power of our innovation and the opportunities for growth, globally and in the U.S., that lie ahead. Importantly, record revenues and operating margin reflect an acceleration of top-line growth and meaningful contributions from all operating regions and our Channel Development segment», said Scott Maw, Starbucks cfo. «Our Q3 results give us confidence in our ability to deliver on our full year fiscal 2014 targets and support the strong 2015 revenue and profit growth targets we introduced today, despite continued challenging economic and consumer headwinds in many of the global markets in which we operate».

Third Quarter Fiscal 2014 Summary

Consolidated net revenues were 4,2 billion USD in Q3/2014, an increase of eleven percent over Q3/2013, driven primarily by six percent growth in global comparable store sales and incremental revenues from 1’654 net new store openings over the past twelve months.

Consolidated operating income increased 25 percent to 768,5 million USD, compared to 615,2 million USD for the same period a year ago. Operating margin expanded 200 basis points to 18,5 percent, primarily driven by sales leverage and lower commodity costs.

Q3 Americas Segment Results

Net revenues for the Americas segment were 3,1 billion USD in Q3/2014, an increase of ten percent over Q3/2013. The increase was driven by six percent growth in comparable store sales and incremental revenues from 759 net new store openings over the past twelve months.

Operating income of 728,5 million USD in Q3/2014 increased 18 percent from 619,3 million USD for the same period a year ago. Operating margin expanded 150 basis points to 23,8 percent, primarily due to sales leverage.

Q3 EMEA Segment Results

Net revenues for the EMEA segment were 323,5 million USD in Q3/2014, an increase of 13 percent over Q3/2013. The growth was primarily due to favorable foreign currency exchange and a three percent increase in comparable store sales. Incremental revenues from 161 net new store openings over the past twelve months also contributed.

Operating income increased 214 percent to 29,2 million USD in Q3/2014, from 9,3 million USD in the prior year quarter. Operating margin expanded 580 basis points to 9,0 percent, primarily driven by sales leverage and continued cost management.

Q3 China/Asia Pacific Segment Results

Net revenues for the China/Asia Pacific segment were 287,6 million USD in Q3/2014, an increase of 23 percent over Q3/2013. The increase was primarily driven by incremental revenues from 740 net new store openings over the past twelve months. A seven percent increase in comparable store sales, driven by strong traffic, also contributed to the net revenue growth.

Operating income of 100,8 million USD in Q3/2014 increased 19 percent compared to the same period a year ago. Operating margin declined 120 basis points to 35,0 percent, driven by the portfolio shift to more company-operated stores and unfavorable foreign currency exchange, partially offset by sales leverage.

Q3 Channel Development Segment Results

Net revenues for the Channel Development segment were 375,3 million USD in Q3/2014, an increase of 13 percent over Q3/2013, primarily driven by increased sales of premium single serve products and higher sales volumes of packaged coffee in the U.S.

Operating income grew 45 percent to 139,3 million USD in Q3/2014 compared to 96,3 million USD for the same period a year ago. Operating margin increased 800 basis points to 37,1 percent in Q3/2014, primarily due to lower coffee costs and improved inventory management compared to the prior year.

Q3 All Other Segments Results

Net revenues for All Other Segments were 109,6 million USD in Q3/2014, an increase of three percent compared to Q3/2013, primarily driven by increased sales in our emerging businesses.

Q3/2014 operating loss increased to 18,9 million USD compared to a loss of 9,4 million USD for the same period a year ago, driven by investments to support growth in our emerging businesses.

Company Updates

In June, Starbucks introduced new FizzioTM handcrafted sodas and «Teavana» Shaken Iced Teas in the U.S. to further extend its Refreshment offerings. The FizzioTM soda machine is a breakthrough in carbonation technology with the ability to deliver an unmatched soda experience. FizzioTM sodas are available in over one third of U.S. company-operated retail stores.

Starbucks opened its first company-operated «Starbucks» store at Walt Disney World Resort. It also recently opened its first store in Bogota, Colombia and its first store in Hanoi, Vietnam. The company expanded the «Teavana» Teabar concept to Los Angeles and opened the second Teabar in New York; now operating five «Teavana» Fine Teas + Teabars in the U.S.

Starbucks and Duracell Powermat announced that they have begun a national rollout of Powermat wireless charging, beginning with stores in the San Francisco Bay Area, with expansion to additional major markets in 2015.

Starbucks, in partnership with Arizona State University, launched the Starbucks College Achievement Plan, empowering thousands of U.S. partners (employees) to complete a bachelor´s degree with Starbucks offering full tuition reimbursement for their junior and senior years for eligible partners.

Starbucks hosted its third Partner Family Forum in China, gathering more than 1’200 Starbucks South China partners together in Guangzhou. This was followed by the first-ever Partner Family Forums held in the U.S.

The Company´s unsecured debt rating was upgraded to A3 with a stable outlook by Moody´s Investors Service. The upgrade affects the company´s nearly 2,1 billion USD senior unsecured bonds. Moody´s also affirmed the company´s short-term commercial paper rating at P-2. Starbucks had held a Baa1 rating with a stable outlook since November 25, 2013.

The Company repurchased 4,2 million shares of common stock in Q3/2014; approximately 18 million shares remain available for purchase under current authorizations.

The Board of Directors declared a cash dividend of 0,26 USD per share, payable on August 22, 2014 to shareholders of record as of August 07, 2014.

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