Net Revenues Up 6% to a Record $6 Billion;
Global and U.S. Comp Store Sales Up 2%
China Net Revenues Up 30%; China Comps Up
6%
Q1 GAAP EPS of $1.57; Non-GAAP EPS of $0.65
Includes $0.07 Benefit from U.S. Tax Law Change
Company Adds 1.4 Million Active Starbucks
Rewards™ Members in the U.S. to 14.2 Million, Up 11%
Year-Over-Year
Starbucks Corporation (NASDAQ:SBUX) today reported financial
results for its 13-week fiscal first quarter ended
December 31, 2017. GAAP results in fiscal 2018 and fiscal 2017
include items which are excluded from non-GAAP results. Please
refer to the reconciliation of GAAP measures to non-GAAP measures
at the end of this release for more information.
Q1 Fiscal 2018
Highlights
- Global comparable store sales
increased 2%, driven by a 2% increase in average ticket
- Americas and U.S. comp store
sales increased 2%, driven by a 2% increase in average ticket
- CAP comp store sales increased
1%, driven by a 1% increase in transactions
- China comp store sales increased
6%, driven by a 6% increase in transactions
- Consolidated net revenues of $6.1
billion grew 6% versus the prior year
- GAAP operating margin of 18.4% declined
140 basis points compared to the prior year; non-GAAP operating
margin of 19.2% declined 80 basis points
- GAAP Earnings Per Share of $1.57
included $0.79 of net gain related to the acquisition of East China
and a $0.13 net benefit from other items which are excluded from
non-GAAP results
- Non-GAAP EPS grew 25% to $0.65 per
share and included a $0.07 benefit from changes in the U.S. tax
law
- Active membership in Starbucks Rewards
in the U.S. grew 11% versus the prior year to 14.2 million, with
member spend representing 37% of U.S. company-operated sales, and
Mobile Order and Pay representing 11% of U.S. company-operated
transactions
- Starbucks Card reached 42% of U.S. and
Canada company-operated transactions
- The company opened 700 net new stores
globally, bringing total store count to 28,039 across 76
markets
- The company returned a record $2
billion to shareholders in the quarter through a combination of
dividends and share repurchases
“Starbucks reported another quarter of record financial results
in Q1 of fiscal 2018, with consolidated revenues up 6% over last
year - up 7% excluding 1% for the impact of streamlining activities
in the quarter. China grew revenues 30% in Q1, with the strategic
acquisition of East China positioning us to accelerate our growth
in the key China market,” said Kevin Johnson, president and ceo.
“Today, Starbucks has two powerful, independent but complementary
engines driving our global growth, the U.S. and China. Our work to
streamline the company is sharpening our focus on our core
operating priorities.”
“Starbucks delivered solid revenue and profit growth and our
first ever $6 billion revenue quarter in Q1,” said Scott Maw, cfo.
“We are laser-focused on accelerating growth in China and driving
improvement across the U.S. business as we move into and through
the back half of the year, and remain committed to delivering on
the long-term targets we announced last quarter.”
First Quarter
Fiscal 2018 Summary
Quarter Ended Dec 31, 2017 Comparable Store
Sales(1) Sales Growth Change in
Transactions Change in Ticket Consolidated 2%
0% 2% Americas 2% 0% 2% CAP 1% 1% 0% EMEA(2)
(1)% (4)% 3% (1) Includes only Starbucks
company-operated stores open 13 months or longer. Comparable store
sales exclude the effect of fluctuations in foreign currency
exchange rates. (2) Company-operated stores represent 16% of the
EMEA segment store portfolio as of December 31, 2017.
Operating
Results Quarter Ended Change
($ in millions, except per share amounts)
Dec 31, 2017 Jan 1, 2017
Net New Stores (1) 700 649 51
Revenues $6,073.7 $5,732.9 6% Operating Income $1,116.1 $1,132.6
(1)% Operating Margin 18.4% 19.8% (140) bps EPS
$1.57 $0.51 208%
(1) Q1 2018 net new stores include the closure of 2 Teavana-branded
stores.
Consolidated net revenues grew 6% over Q1 FY17 to $6.1 billion
in Q1 FY18, primarily driven by incremental revenues from the
opening of 2,305 net new stores over the past 12 months and a 2%
growth in global comparable store sales.
Consolidated operating income declined 1% to $1,116.1 million in
Q1 FY18, down from $1,132.6 million in Q1 FY17. Consolidated
operating margin declined 140 basis points to 18.4%, primarily due
to food-related mix shift in the Americas, as well as restructuring
costs related to the company's ongoing efforts to streamline
business operations.
Q1 Americas
Segment Results
Quarter Ended
Change ($ in millions)
Dec
31, 2017 Jan 1, 2017
Net New Stores 278 251 27 Revenues
$4,265.8 $3,991.4 7% Operating Income $979.4 $958.5 2% Operating
Margin 23.0% 24.0%
(100) bps
Net revenues for the Americas segment grew 7% over Q1 FY17 to
$4.3 billion in Q1 FY18, primarily driven by incremental revenues
from 979 net new store openings over the past 12 months and a 2%
growth in comparable store sales.
Operating income of $979.4 million in Q1 FY18 grew 2% versus
$958.5 million in Q1 FY17. Operating margin of 23.0% declined 100
basis points primarily due to food-related mix shift, partially
offset by sales leverage.
Q1 China/Asia
Pacific Segment Results
Quarter Ended
Change ($ in millions)
Dec
31, 2017 Jan 1, 2017
Net New Stores 300 303 (3) Revenues
$843.7 $770.8 9% Operating Income $196.8 $163.4 20% Operating
Margin 23.3% 21.2%
210 bps
Net revenues for the China/Asia Pacific segment grew 9% over Q1
FY17 to $843.7 million in Q1 FY18, primarily driven by incremental
revenues from 1,033 net new store openings over the past 12 months
and a 1% increase in comparable store sales. The increase was
partially offset by the absence of revenue related to the sale of
our Singapore retail operations to a licensed partner in Q4 FY17 as
part of the company's ongoing efforts to streamline business
operations and retail geographies.
Q1 FY18 operating income of $196.8 million grew 20% over Q1 FY17
operating income of $163.4 million. Operating margin expanded 210
basis points to 23.3%, primarily due to sales leverage and
favorable foreign currency translation.
Q1 EMEA Segment
Results
Quarter Ended
Change ($ in millions)
Dec
31, 2017 Jan 1, 2017
Net New Stores 123 95 28 Revenues
$283.9 $262.4 8% Operating Income $39.1 $44.1 (11)% Operating
Margin 13.8% 16.8%
(300) bps
Net revenues for the EMEA segment grew 8% over Q1 FY17 to $283.9
million in Q1 FY18, primarily driven by favorable foreign currency
translation and incremental revenues from the opening of 365 net
new licensed stores over the past 12 months.
Operating income of $39.1 million in Q1 FY18 declined 11% versus
operating income of $44.1 million in Q1 FY17. Operating margin
declined 300 basis points to 13.8% primarily driven by sales
deleverage in company-operated stores.
Q1 Channel
Development Segment Results
Quarter Ended
Change ($ in millions)
Dec
31, 2017 Jan 1, 2017
Revenues $560.3 $553.7 1% Operating
Income $243.3 $242.9 —% Operating Margin 43.4%
43.9% (50) bps
Net revenues for the Channel Development segment of $560.3
million in Q1 FY18 increased 1% versus the prior year quarter
primarily driven by our foodservice, international and packaged
coffee channels. This increase was partially offset by competitive
pricing on single-serve items and the absence of revenue from the
sale of our Tazo tea brand late in Q1 FY18.
Operating income of $243.3 million in Q1 FY18 was flat compared
to Q1 FY17. Operating margin declined 50 basis points to 43.4%
primarily driven by deleverage on cost of sales and lower income
from our North American Coffee Partnership joint venture, partially
offset by lower marketing expense.
Q1 All Other
Segments Results
Quarter Ended Change ($
in millions)
Dec 31, 2017
Jan 1, 2017 Net New Stores (1)
— (1) Revenues $120.0 $154.6 (22)% Operating
Income/(Loss) $(30.0)
$9.6 nm
All Other Segments primarily includes Teavana-branded stores,
Seattle’s Best Coffee®, and Starbucks Reserve™ and Roastery
businesses. The operating loss in Q1 FY18 was primarily due to
restructuring costs related to our strategy to close Teavana retail
stores and focus on Teavana tea within Starbucks stores.
Fiscal 2018 Targets
The company reiterates the following full year FY18 targets,
with the exception of earnings per share which has been modified
for the expected net impact of changes in the U.S. tax law and
related reinvestments. Year-over-year growth is based on prior year
non-GAAP results. Please refer to the reconciliation of GAAP
measures to non-GAAP measures at the end of this release.
- Continue to expect approximately 2,300
net new stores globally
- Continue to expect 3-5% comparable
store sales growth globally, expect to be near the low end of the
range for the year
- Continue to expect consolidated revenue
growth in the high single digits consistent with long term
guidance; when including approximately 2% of net favorability
related to the acquisition of East China and other streamlining
activities, we expect consolidated revenue growth of approximately
9-11% in FY18
- Now expect GAAP EPS in the range of
$3.32 to $3.36 and non-GAAP EPS in the range of $2.48 to $2.53,
consistent with guidance issued last quarter but updated to include
the expected net impact of the new U.S. tax law's federal statutory
tax rate and related reinvestments
The company will provide select quarterly and segment
information regarding its business outlook during its regularly
scheduled quarterly earnings conference calls; this information
will also be available following the call on the company's website
at http://investor.starbucks.com.
Company Updates
- On December 31, Starbucks completed the
previously announced acquisition of the remaining 50% share of its
East China business from long-term joint venture partners,
Uni-President ("UPEC") and President Chain Store Corporation
("PCSC"). As a result of this acquisition, Starbucks has assumed
100% ownership of over 1,400 Starbucks stores in Shanghai and in
the Jiangsu and Zhejiang Provinces, bringing the total number of
company-owned stores in China to over 3,100 at the time of closing.
Also on December 31, UPEC and PCSC acquired Starbucks 50% interest
in President Starbucks Coffee Taiwan Limited and assumed 100%
ownership of Starbucks operations in Taiwan.
- The company completed its previously
announced sale of the Tazo Tea brand to Unilever on December 11.
Starbucks will instead drive a single tea brand strategy and focus
with its super premium tea brand, Teavana, by continuing to invest
in the growth, innovation and development of the Teavana brand of
teas in its Starbucks stores and in channels outside its
stores.
- Last week, the company was named 5th in
Fortune’s World’s Most Admired Companies survey, and placed in the
top spot for the food services industry.
- The company opened its Starbucks
Reserve™ Roastery in Shanghai, China, on December 5, now the
largest Starbucks store in the world. The Roastery features onsite
baking by Italian food purveyor Rocco Princi for the first time
ever in China and features onsite roasting and brewing of Starbucks
Reserve coffees. Starbucks also brought Princi Bakery to the U.S.
inside its Seattle Roastery in November 2017.
- Together with its local business
partner, Baristas del Caribe, LLC, Starbucks opened its first store
in Puerto Rico since Hurricane Maria struck the island in September
2017. The two companies and their namesake nonprofit foundations
have also collectively contributed more than $1.3 million toward
emergency relief and long-term rebuilding efforts across the
region.
- In November 2017, the company opened
its first store in Jamaica and entered its 76th market globally,
marking a historic milestone for the global coffee company’s
Caribbean operations and its storied history of sourcing
high-quality coffee from the region going back more than four
decades.
- The company repurchased 28.5 million
shares of common stock in Q1 FY18; approximately 52 million shares
remain available for purchase under current authorizations.
- The Board of Directors declared a cash
dividend of $0.30 per share, payable on February 23, 2018, to
shareholders of record as of February 8, 2018.
Conference Calls
Starbucks will hold a conference call today at 2:00 p.m. Pacific
Time, which will be hosted by Kevin Johnson, president and ceo, and
Scott Maw, cfo. The call will be webcast and can be accessed at
http://investor.starbucks.com. A
replay of the webcast will be available until end of day Saturday,
February 24, 2018.
In addition, Starbucks will hold a supplemental conference call
to provide a market update on China as well as to address
high-level modeling-related questions on Wednesday, January 31,
2018, at 2:00 p.m. Pacific Time. A press release announcing
the webcast will be provided in advance.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to
ethically sourcing and roasting high-quality arabica coffee. Today,
with stores around the globe, the company is the premier roaster
and retailer of specialty coffee in the world. Through our
unwavering commitment to excellence and our guiding principles, we
bring the unique Starbucks Experience to life for every customer
through every cup. To share in the experience, please visit us in
our stores or online at news.starbucks.com or www.starbucks.com.
Forward-Looking
Statements
This release contains forward-looking statements relating to
certain company initiatives, strategies and plans, as well as
trends in or expectations regarding our diversified business model,
the strength, resilience, momentum, and potential of our business,
operations, and brand, the impact of our food, beverage and digital
innovation, operational improvements, our two significant profit
engines driving our global returns, our focus on accelerating
growth in China, driving improvement across the U.S. business,
statements regarding the estimated impact of the changes in U.S.
tax law, net new stores, revenues, earnings per share, operating
margins, comparable store sales, our fiscal 2018 and long-term
financial targets, and our strategic, operational, and digital
moves, including the purchase of the remaining 50% ownership of the
East China market, the closure of Teavana stores and other
streamlining activities. These forward-looking statements are based
on currently available operating, financial and competitive
information and are subject to a number of significant risks and
uncertainties. Actual future results may differ materially
depending on a variety of factors including, but not limited to,
fluctuations in U.S. and international economies and currencies,
our ability to preserve, grow and leverage our brands, potential
negative effects of incidents involving food or beverage-borne
illnesses, tampering, adulteration, contamination or mislabeling,
potential negative effects of material breaches of our information
technology systems to the extent we experience a material breach,
material failures of our information technology systems, costs
associated with, and the successful execution of, the company’s
initiatives and plans, including the integration of Starbucks
Japan, the recently completed purchase of the remaining 50%
ownership of the East China market and the closure of Teavana
stores, the acceptance of the company’s products by our customers,
our ability to obtain financing on acceptable terms, the impact of
competition, coffee, dairy and other raw materials prices and
availability, the effect of legal proceedings, the effects of the
U.S. Tax Cuts and Jobs Act and related guidance and regulations
that may be implemented, and other risks detailed in the company
filings with the Securities and Exchange Commission, including the
“Risk Factors” section of Starbucks Annual Report on Form 10-K for
the fiscal year ended October 1, 2017. The company assumes no
obligation to update any of these forward-looking statements.
STARBUCKS
CORPORATIONCONSOLIDATED STATEMENTS OF
EARNINGS(unaudited, in millions, except per share data)
Quarter Ended Quarter Ended
Dec 31,2017
Jan 1,2017
%Change
Dec 31,2017
Jan 1,2017
As a % of totalnet revenues Net
revenues: Company-operated stores $ 4,741.8 $ 4,469.3 6.1 %
78.1 % 78.0 % Licensed stores 682.4 602.4 13.3 11.2 10.5 CPG,
foodservice and other 649.5 661.2 (1.8 ) 10.7
11.5
Total net revenues 6,073.7 5,732.9
5.9 100.0 100.0 Cost of sales including
occupancy costs(1) 2,502.9 2,295.0 9.1 41.2 40.0 Store operating
expenses 1,737.0 1,638.2 6.0 28.6 28.6 Other operating expenses
141.6 145.4 (2.6 ) 2.3 2.5 Depreciation and amortization expenses
258.8 249.7 3.6 4.3 4.4 General and administrative expenses 379.1
356.4 6.4 6.2 6.2 Restructuring expenses(2) 27.6 — nm
0.5 — Total operating expenses 5,047.0 4,684.7 7.7
83.1 81.7 Income from equity investees 89.4 84.4 5.9
1.5 1.5
Operating income 1,116.1
1,132.6 (1.5 ) 18.4 19.8 Gain
resulting from acquisition of joint venture(3) 1,326.3 — nm 21.8 —
Gains resulting from divestiture of certain operations (4) 501.2 —
nm 8.3 — Interest income and other, net 88.2 24.1 266.0 1.5 0.4
Interest expense (25.9 ) (23.8 ) 8.8 (0.4 ) (0.4 ) Earnings before
income taxes 3,005.9 1,132.9 165.3 49.5 19.8 Income tax expense
755.8 381.4 98.2 12.4 6.7 Net earnings
including noncontrolling interests 2,250.1 751.5 199.4 37.0 13.1
Net earnings/(loss) attributable to noncontrolling interests (0.1 )
(0.3 ) (66.7 ) — —
Net earnings attributable to
Starbucks $ 2,250.2 $ 751.8
199.3 37.0 % 13.1 %
Net earnings per common share - diluted $
1.57 $ 0.51 207.8
% Weighted avg. shares outstanding - diluted 1,434.6 1,470.5
Cash dividends declared per share $ 0.30 $ 0.25
Supplemental Ratios: Store operating expenses as a % of
company-operated store revenues 36.6 % 36.7 % Other operating
expenses as a % of non-company-operated store revenues 10.6 % 11.5
% Effective tax rate including noncontrolling interests 25.1 % 33.7
%
(1) As a result of our restructuring
efforts, $4.4 million was recorded in cost of sales including
occupancy costs related to inventory write-offs.
(2) Primarily includes restructuring
expenses of $25.9 million associated with our Teavana-branded
stores and $1.6 million related to our Starbucks North American
retail businesses.
(3) Represents the gain resulting from the
acquisition of our East China joint venture.
(4) Primarily includes the gains on the
sales of our Tazo brand and our Taiwan joint venture for $347.9
million and $153.0 million, respectively.
Segment Results (in
millions)
Americas
Dec 31,2017
Jan 1,2017
%Change
Dec 31,2017
Jan 1,2017
Quarter
Ended
As a % of Americastotal net
revenues
Net revenues: Company-operated stores $ 3,787.0 $ 3,561.0
6.3 % 88.8 % 89.2 % Licensed stores 466.7 421.3 10.8 10.9 10.6
Foodservice and other 12.1 9.1 33.0 0.3 0.2
Total net revenues 4,265.8 3,991.4
6.9 100.0 100.0 Cost of sales including
occupancy costs 1,603.8 1,440.3 11.4 37.6 36.1 Store operating
expenses 1,433.4 1,356.3 5.7 33.6 34.0 Other operating expenses
37.5 31.9 17.6 0.9 0.8 Depreciation and amortization expenses 158.0
152.4 3.7 3.7 3.8 General and administrative expenses 52.1 52.0 0.2
1.2 1.3 Restructuring expenses(1) 1.6 — nm — —
Total operating expenses 3,286.4 3,032.9 8.4
77.0 76.0
Operating income $
979.4 $ 958.5 2.2
% 23.0 % 24.0 % Supplemental
Ratios: Store operating expenses as a % of company-operated
store revenues 37.9 % 38.1 % Other operating expenses as a % of
non-company-operated store revenues 7.8 % 7.4 %
(1) Represents restructuring expenses of
$1.6 million related to our Starbucks North American retail
business.
China/Asia Pacific (CAP)
Dec 31,2017
Jan 1,2017
%Change
Dec 31,2017
Jan 1,2017
Quarter
Ended
As a % of CAPtotal net
revenues
Net revenues: Company-operated stores $ 742.5 $ 691.5 7.4 %
88.0 % 89.7 % Licensed stores 98.4 78.0 26.2 11.7 10.1 Foodservice
and other 2.8 1.3 115.4 0.3 0.2
Total net revenues 843.7 770.8 9.5
100.0 100.0 Cost of sales including occupancy costs
371.7 337.3 10.2 44.1 43.8 Store operating expenses 218.6 204.3 7.0
25.9 26.5 Other operating expenses 21.2 19.1 11.0 2.5 2.5
Depreciation and amortization expenses 53.7 48.6 10.5 6.4 6.3
General and administrative expenses 32.4 40.6 (20.2 )
3.8 5.3 Total operating expenses 697.6 649.9 7.3 82.7
84.3 Income from equity investees 50.7 42.5 19.3 6.0
5.5
Operating income $ 196.8
$ 163.4 20.4 %
23.3 % 21.2 % Supplemental
Ratios: Store operating expenses as a % of company-operated
store revenues 29.4 % 29.5 % Other operating expenses as a % of
non-company-operated store revenues 20.9 % 24.1 %
EMEA
Dec 31,2017
Jan 1,2017
%Change
Dec 31,2017
Jan 1,2017
Quarter
Ended
As a % of EMEAtotal net
revenues
Net revenues: Company-operated stores $ 151.6 $ 145.9 3.9 %
53.4 % 55.6 % Licensed stores 116.2 102.2 13.7 40.9 38.9
Foodservice 16.1 14.3 12.6 5.7 5.4
Total net revenues 283.9 262.4 8.2
100.0 100.0 Cost of sales including occupancy costs
152.1 136.1 11.8 53.6 51.9 Store operating expenses 54.7 46.9 16.6
19.3 17.9 Other operating expenses 16.3 16.0 1.9 5.7 6.1
Depreciation and amortization expenses 7.7 7.6 1.3 2.7 2.9 General
and administrative expenses 14.0 11.7 19.7 4.9
4.5 Total operating expenses 244.8 218.3 12.1
86.2 83.2
Operating income $
39.1 $ 44.1 (11.3
)% 13.8 % 16.8 % Supplemental
Ratios: Store operating expenses as a % of company-operated
store revenues 36.1 % 32.1 % Other operating expenses as a % of
non-company-operated store revenues 12.3 % 13.7 %
Channel Development
Dec 31,2017
Jan 1,2017
%Change
Dec 31,2017
Jan 1,2017
Quarter
Ended
As a % ofChannel Development
total net revenues
Net revenues: CPG $ 435.8 $ 437.1 (0.3 )% 77.8 % 78.9 %
Foodservice 124.5 116.6 6.8 22.2 21.1
Total net revenues 560.3 553.7 1.2
100.0 100.0 Cost of sales 296.3 288.5 2.7 52.9 52.1
Other operating expenses 55.6 60.4 (7.9 ) 9.9 10.9 Depreciation and
amortization expenses 0.5 0.6 (16.7 ) 0.1 0.1 General and
administrative expenses 3.3 3.2 3.1 0.6 0.6
Total operating expenses 355.7 352.7 0.9 63.5 63.7 Income
from equity investees 38.7 41.9 (7.6 ) 6.9 7.6
Operating income $ 243.3
$ 242.9 0.2 % 43.4
% 43.9 %
All Other Segments
Dec 31,2017
Jan 1,2017
%Change
Quarter
Ended
Net revenues: Company-operated stores $ 60.7 $ 70.9
(14.4 )% Licensed stores 1.1 0.9 22.2 CPG, foodservice and other
58.2 82.8 (29.7 )
Total net revenues
120.0 154.6 (22.4 ) Cost of sales
including occupancy costs(1) 79.1 90.4 (12.5 ) Store operating
expenses 30.3 30.7 (1.3 ) Other operating expenses 11.2 17.5 (36.0
) Depreciation and amortization expenses 0.7 2.9 (75.9 ) General
and administrative expenses 2.7 3.5 (22.9 ) Restructuring
expenses(2) 26.0 — nm Total operating expenses
150.0 145.0 3.4
Operating income/(loss)
$ (30.0 ) $ 9.6
nm
(1) As a result of our restructuring
efforts, $4.4 million was recorded in cost of sales including
occupancy costs related to inventory write-offs.
(2) Primarily includes restructuring
expenses of $25.9 million associated with our Teavana-branded
stores.
Supplemental
Information
The following supplemental information is provided for
historical and comparative purposes.
U.S. Supplemental
Data
Quarter Ended
($ in millions)
Dec 31, 2017
Jan 1, 2017
Change Revenues $3,884.4 $3,654.4 6%
Comparable Store Sales Growth(1) 2% 3% Change in Transactions 0%
(2%) Change in Ticket 2%
5% (1) Includes only Starbucks
company-operated stores open 13 months or longer.
Store
Data
Net stores opened/(closed)
andtransferred during the period
Quarter Ended Stores open as
of
Dec 31,2017
Jan 1,2017
Dec 31,2017
Jan 1,2017
Americas: Company-operated stores 112 75 9,525 9,094 Licensed
stores 166 176 7,312 6,764 Total Americas 278
251 16,837 15,858 China/Asia Pacific(1):
Company-operated stores 1,612 104 4,682 2,915 Licensed stores
(1,312 ) 199 3,097 3,831 Total China/Asia Pacific 300
303 7,779 6,746 EMEA: Company-operated stores
1 (18 ) 503 505 Licensed stores 122 113 2,594
2,232 Total EMEA 123 95 3,097 2,737 All Other
Segments(2): Company-operated stores (1 ) (2 ) 289 356 Licensed
stores — 2 37 37 Total All Other Segments (1 )
— 326 393
Total
Company 700 649 28,039
25,734
(1) China/Asia Pacific store data includes
the transfer of 1,477 licensed stores in East China to
company-operated retail stores as a result of the purchase of our
East China joint venture in the first quarter of fiscal 2018.
(2) As of December 31, 2017, All Other Segments included 323
Teavana-branded stores, of which 286 stores were company-operated.
Non-GAAP Disclosure
In addition to the GAAP results provided in this release, the
company provides certain non-GAAP financial measures that are not
in accordance with, or alternatives for, generally accepted
accounting principles in the United States. Our non-GAAP financial
measures of non-GAAP operating income, non-GAAP operating margin
and non-GAAP EPS exclude the below listed items, as they do not
contribute to a meaningful evaluation of the company's future
operating performance or comparisons to the company's past
operating performance. The GAAP measures most directly comparable
to non-GAAP operating income, non-GAAP operating margin and
non-GAAP EPS are operating income, operating margin and diluted net
earnings per share, respectively.
Non-GAAP Exclusion
Rationale East China acquisition-related
gain Management excludes the gain on the purchase of our East China
joint venture as this incremental gain is specific to the purchase
activity and for reasons discussed above. Sale of Taiwan
joint venture operations Management excludes the gain related to
the sale of our Taiwan joint venture operations as this incremental
gain is specific to the sale activity and for reasons discussed
above.
Sale of Tazo brand
Management excludes the net gain on the sale of our assets
associated with our Tazo brand and associated transaction costs as
these items do not reflect future gains, losses, costs or tax
benefits and for reasons discussed above. Restructuring
expenses
Management excludes restructuring charges
related to strategic shifts in its Teavana and e-commerce business
units as well as related to divesting certain lower margin
businesses and assets, such as closure of certain company-operated
stores for reasons discussed above. Additionally, these expenses
are anticipated to be completed within a finite period of time.
CAP transaction and integration-related costs
Management excludes transaction and
integration costs and amortization of the acquired intangible
assets for reasons discussed above. Additionally, the majority of
these costs will be recognized over a finite period of time.
Sale of Singapore retail operations Management excludes the
net gain related to the sale of our Singapore retail operations as
these items do not reflect future gains, losses or tax impacts and
for reasons discussed above. Sale of Germany retail
operations Management excludes the net gain, associated costs and
changes in estimated indemnifications related to the sale of our
Germany retail operations as these items do not reflect future
gains, losses or tax impacts and for reasons discussed above.
The Starbucks Foundation donation Management excludes the
company's largest donation to a non-profit organization for reasons
discussed above.
2018 U.S. stock award
Management excludes the announced
incremental 2018 stock-based compensation award for reasons
discussed above.
Other tax matters
On December 22, 2017, the Tax Cuts and
Jobs Act was signed into U.S. law. Management excludes the
estimated transition tax on undistributed foreign earnings and the
re–measurement of deferred tax assets and liabilities due to the
reduction of the U.S. federal corporate income tax rate for reasons
discussed above.
Non-GAAP operating income, non-GAAP operating margin and
non-GAAP EPS may have limitations as analytical tools. These
measures should not be considered in isolation or as a substitute
for analysis of the company's results as reported under GAAP. Other
companies may calculate these non-GAAP financial measures
differently than the company does, limiting the usefulness of those
measures for comparative purposes.
STARBUCKS
CORPORATIONRECONCILIATION OF SELECTED GAAP MEASURES TO
NON-GAAP MEASURES(unaudited)
($ in millions)
Quarter Ended
Consolidated
Dec 31,2017
Jan 1,2017
Change Operating income, as reported (GAAP) $ 1,116.1 $
1,132.6 (1.5)% Restructuring expenses (1) 32.0
—
CAP transaction and integration-related items (2) 18.5 14.0
Sale of Tazo brand transaction costs
0.9
—
Non-GAAP operating income $ 1,167.5 $ 1,146.6
1.8% Operating margin, as reported (GAAP) 18.4 % 19.8 %
(140) bps Restructuring expenses (1) 0.5 — CAP transaction and
integration-related items (2) 0.3 0.2
Sale of Tazo brand
— — Non-GAAP operating margin 19.2 % 20.0 % (80) bps
Diluted net earnings per share, as reported (GAAP) $ 1.57 $
0.51 207.8% East China acquisition gain (0.92 ) — Sale of Taiwan
joint venture operations (0.11 )
—
Sale of Tazo brand
(0.24 ) — Restructuring expenses (1) 0.02 — CAP transaction and
integration-related items (2) 0.01 0.01 Other tax matters (3) 0.10
—
Income tax effect on Non-GAAP adjustments (4) 0.22 —
Non-GAAP net earnings per share $ 0.65 $ 0.52 25.0%
(1) Represents $27.6 million associated
with our restructuring efforts, primarily lease termination costs.
Inventory write-offs of $4.4 million related to these efforts were
recorded within cost of sales including occupancy costs.
(2) Includes transaction costs for the
acquisition of our East China joint venture and the divestiture of
our Taiwan joint venture; ongoing amortization expense of acquired
intangible assets associated with the acquisition of Starbucks
Japan; and the related post-acquisition integration costs, such as
incremental information technology and compensation-related
costs.
(3) Represents the estimated impact of the
U.S. Tax Cuts and Jobs Act, specifically the transition tax on
undistributed foreign earnings and re-measurement of deferred
taxes.
(4) Income tax effect on non-GAAP
adjustments was determined based on the nature of the underlying
items and their relevant jurisdictional tax rates.
Year Ended
Sep 30,2018
Oct 1,2017
Consolidated
(Projected) (As Reported)
Change Diluted net earnings per
share (GAAP) $3.32 - $3.36 $ 1.97
69% - 71%
East China acquisition gain (0.94 ) — Sale of Taiwan joint venture
operations (0.11 ) —
Sale of Tazo brand
(0.25 ) — Restructuring expenses (1) 0.13 0.11 CAP transaction and
integration-related items (2) 0.17 0.04 Sale of Singapore retail
operations — (0.06 ) Sale of Germany retail operations — (0.01 )
The Starbucks Foundation donation — 0.03 Other tax matters (3) 0.11
—
2018 U.S. stock award (4)
0.04
—
Income tax effect on Non-GAAP adjustments (5) 0.01 (0.04 )
Non-GAAP net earnings per share $2.48 - $2.53 $ 2.06
20% - 23%
(1) Represents restructuring related
expenses and related inventory write-offs recorded within cost of
sales including occupancy costs.
(2) Includes transaction costs for the
acquisition of our East China joint venture and the divestiture of
our Taiwan joint venture; ongoing amortization expense of acquired
intangible assets associated with the acquisition of our East China
joint venture and Starbucks Japan; and the related post-acquisition
integration costs, such as incremental information technology and
compensation-related costs.
(3) Represents the estimated impact of the
U.S. Tax Cuts and Jobs Act, specifically the transition tax on
undistributed foreign earnings and re-measurement of deferred
taxes.
(4) Represents incremental stock-based
compensation award for U.S. partners.
(5) Income tax effect on non-GAAP
adjustments was determined based on the nature of the underlying
items and their relevant jurisdictional tax rates.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180125006234/en/
Starbucks CorporationInvestor Relations:Tom Shaw,
206-318-7118investorrelations@starbucks.comorMedia:Reggie
Borges, 206-318-7100press@starbucks.com
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