Q2 Consolidated Net Revenues of $6.0 Billion,
Down 5% from Prior Year Due to Adverse Impact of COVID-19
Q2 GAAP EPS of $0.28; Non-GAAP EPS of $0.32
Reflecting Material Sales Deleverage and Retail Partner Support
COVID-19 Impacts Expected to Intensify in Q3
and Moderate in Q4
Substantial Recovery in China Expected by End
of Fiscal 2020
Starbucks Corporation (NASDAQ: SBUX) today reported financial
results for its 13-week fiscal second quarter ended March 29, 2020.
GAAP results in fiscal 2020 and fiscal 2019 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.
“People around the world are united around a common cause as we
navigate the COVID-19 situation globally. We are very grateful for
the heroic efforts of medical personnel, first responders,
government officials and volunteers who are working tirelessly in
the service of others. I am exceptionally proud of the thousands of
Starbucks partners around the world who are safely serving
customers and playing a positive role in every community we serve,”
said Kevin Johnson, president and ceo.
“Since the beginning of this global crisis, Starbucks has made
decisions that prioritize the well-being of our partners and
customers, support health and government officials, and responsibly
serve our communities. This principled approach is showing steady
business improvement in China where today, substantially all
existing Starbucks® stores have reopened with modified operations,
new store locations are being added and customer engagement
continues to grow with each passing week. We are leveraging our
experience in China to inform our actions in other markets,
including the U.S., where we are now entering the ‘monitor and
adapt’ phase to reopen many more stores with best-in-class safety
protocols. We continue to navigate this dynamic situation — which
we believe is temporary — and are confident that Starbucks will
emerge from this global crisis even stronger than before,”
concluded Johnson.
Q2 Fiscal 2020
Highlights
- Global comparable store sales declined 10%, driven by a 13%
decrease in comparable transactions, partially offset by a 4%
increase in average ticket
- Americas and U.S. comparable store sales declined 3%, driven by
a 7% decrease in comparable transactions, partially offset by a 5%
increase in average ticket
- International comparable store sales were down 31%, driven by a
32% decline in comparable transactions, slightly offset by a 1%
increase in average ticket; China comparable store sales were down
50%, with comparable transactions down 53%
- The company opened 255 net new stores in Q2, yielding 6%
year-over-year unit growth, ending the period with 32,050 stores
globally, of which 51% and 49% were company-operated and licensed,
respectively
- Stores in the U.S. and China comprised 61% of the company's
global portfolio at the end of Q2, with 15,257 and 4,351 stores,
respectively
- Consolidated net revenues of $6.0 billion declined 5% from the
prior year due to lost sales related to the COVID-19 outbreak
- Lost sales include the effects of temporary store closures,
modified operations, reduced hours and reduced customer
traffic
- GAAP operating margin contracted 550 basis points
year-over-year to 8.1%, primarily due to sales deleverage and
additional costs incurred in response to the COVID-19 outbreak,
mainly catastrophe wages as well as enhanced pay programs and
additional benefits in support of retail store partners, inventory
write-offs and store safety items
- Non-GAAP operating margin of 9.2% contracted 660 basis points
compared to the prior year
- GAAP Earnings Per Share of $0.28, down 47% from the prior year
primarily due to unfavorable impacts related to the COVID-19
outbreak
- Non-GAAP EPS of $0.32, down 47% from the prior year
- Starbucks® Rewards loyalty program grew to 19.4 million active
members in the U.S., up 15% year-over-year
Q2 Americas Segment
Results
Quarter Ended
Change (%)
($ in millions)
Mar 29, 2020
Mar 31, 2019
Comparable Store Sales Growth (1)
(3)%
4%
Change in Transactions
(7)%
0%
Change in Ticket
5%
4%
Store Count
18,271
17,719
3%
Revenues
$4,330.0
$4,314.1
0%
Operating Income
$621.2
$856.4
(27)%
Operating Margin
14.3%
19.9%
(560) bps
(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 and Siren
Retail stores. Comparable store sales include stores that were
temporarily closed as a result of the COVID-19 outbreak.
Net revenues for the Americas segment of $4.3 billion in Q2 FY20
were flat relative to Q2 FY19, as an increase from 552 net new
store openings over the past 12 months, or 3% store growth, was
offset by a 3% decrease in comparable store sales due to lost sales
related to the COVID-19 outbreak.
Operating income declined 27% to $621.2 million in Q2 FY20, down
from $856.4 million in Q2 FY19. Operating margin of 14.3%
contracted 560 basis points, primarily due to sales deleverage and
additional costs incurred in response to the COVID-19 outbreak,
primarily catastrophe wages as well as enhanced pay programs and
additional benefits in support of retail store partners, inventory
write-offs and store safety items.
Q2 International Segment
Results
Quarter Ended
Change (%)
($ in millions)
Mar 29, 2020
Mar 31, 2019
Comparable Store Sales Growth (1)
(31)%
2%
Change in Transactions
(32)%
0%
Change in Ticket
1%
2%
Store Count
13,779
12,465
11%
Revenues
$1,134.6
$1,529.4
(26)%
Operating Income/(Loss)
($15.4)
$201.8
(108)%
Operating Margin/(Loss)
(1.4)%
13.2%
(1,460) bps
(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 and Siren
Retail stores. Comparable store sales include stores that were
temporarily closed as a result of the COVID-19 outbreak
Net revenues for the International segment of $1.1 billion in Q2
FY20 were 26% lower relative to Q2 FY19, primarily due to a 31%
decrease in comparable store sales as a result of lost sales
related to the COVID-19 outbreak. Also contributing to the decrease
was a 4% revenue-dilutive impact of converting certain retail
businesses to fully licensed markets. These decreases were
partially offset by 1,314 net new store openings, or 11% store
growth, over the past 12 months.
The International segment reported an operating loss of $15.4
million in Q2 FY20 compared to operating income of $201.8 million
in Q2 FY19. Operating margin contracted 1,460 basis points to
(1.4)%, primarily due to sales deleverage as partner wages and
benefits and occupancy costs continued to be incurred even while
stores in most markets within the segment were temporarily closed
or operating under modified models and hours.
Q2 Channel Development Segment
Results
Quarter Ended
Change (%)
($ in millions)
Mar 29, 2020
Mar 31, 2019
Revenues
$519.1
$446.6
16%
Operating Income
$189.6
$148.9
27%
Operating Margin
36.5%
33.3%
320 bps
Net revenues for the Channel Development segment increased 16%
in Q2 FY20 to $519.1 million from Q2 FY19, primarily driven by
strong performance of the Global Coffee Alliance, including
additional product sales to Nestlé to transition Foodservice order
fulfillment, as well as a benefit related to the transfer of
certain single-serve product activities to Nestlé on a go-forward
basis. Given Channel Development's at-home coffee offerings in
grocery stores, at mass merchants and online, COVID-19 did not
materially disrupt this segment's overall revenue in Q2 FY20.
Operating income grew 27% to $189.6 million in Q2 FY20, up from
$148.9 million in Q2 FY19. Operating margin expanded 320 basis
points to 36.5%, primarily due to the benefit related to the
transfer of certain single-serve product activities to Nestlé on a
go-forward basis noted above.
Fiscal 2020 Guidance
To protect the health and well-being of our partners and
customers—and in support of efforts to control the spread of the
COVID-19 outbreak—currently, we have temporarily closed
approximately 50% of our company-operated stores in the U.S., as
well as more than 75% in Canada, Japan and the United Kingdom. In
China, where our stores are company-operated, 98% are open but
operating under modified schedules and enhanced safety-related
protocols, including limited cafe seating. We expect China's sales
to substantially recover with comparable store sales roughly flat
to prior year levels at the end of fiscal year 2020. Currently,
approximately 50% of our global licensed store portfolio is also
closed, with higher levels of closure in Europe, the Middle East
and Africa, and lower levels of closure in Asia Pacific.
While this disruption to Starbucks business is expected to be
temporary, given the dynamic nature of the COVID-19 outbreak and
how it is affecting our business globally, including our largest
market, the U.S., we are currently unable to estimate full company
financial impacts with reasonable accuracy. Additionally, given the
late-quarter onset of COVID-19 impacts in the U.S.—as well as a
materially higher flow-through rate on lost sales in the U.S.—we
expect the negative financial impacts of COVID-19 to be
significantly greater in Q3 FY20 compared to Q2 FY20, and to extend
into Q4 FY20 but at a more moderate level. Therefore, until we have
greater visibility into the impact, in the U.S. in particular, and
except for the selected metrics noted below, total company guidance
for fiscal 2020 will remain suspended as communicated in our April
8 letter to Starbucks stakeholders.
All guidance for the metrics noted below is for fiscal year 2020
and growth metrics are relative to fiscal year 2019. Please note,
the guidance provided below is dependent on our current
expectations which may be impacted by prevailing, external
conditions and local safety guidelines.
- China comparable store sales growth:
- Q3 FY20: -25% to -35%
- Q4 FY20: -10% to flat
- Full year FY20: -15% to -25%
- At least 500 net new stores in China
- Channel Development GAAP revenue decline of 6% to 8% with
modest operating margin improvement
- Capital expenditures of approximately $1.5 billion
Based on our substantial experience in China to date, we
continue to believe that the impacts of the COVID-19 outbreak are
temporary and that our business will fully recover over time.
Consistent with the business updates to Starbucks stakeholders on
March 5 and April 8, we will continue to provide transparent
updates as we gain visibility to performance trends, as well as the
steps we are taking to position the company for full recovery.
Please refer to the reconciliation of GAAP measures to non-GAAP
measures at the end of this release.
The company will provide additional information regarding its
business outlook during its regularly scheduled quarterly earnings
conference call; this information will also be available following
the call on the company's website at
http://investor.starbucks.com.
Company Updates
- Through the dynamic COVID-19 pandemic, Starbucks has responded
swiftly and responsibly, making proactive decisions grounded in
transparency and science. These decisions have been communicated
transparently to all Starbucks stakeholders and have been aimed at
prioritizing the health and well-being of Starbucks partners and
customers; playing a constructive role in supporting health and
government officials working to mitigate the spread of the virus;
and showing up in a positive and responsible way to serve our
communities.
- Building on our Starbucks store partners' commitment to the
communities they serve, Starbucks announced on March 25 that any
customer who identifies as a front-line responder to the COVID-19
outbreak will receive a tall brewed coffee at no charge- an offer
recently extended through May.
- In March, Starbucks announced it will open a state-of-the-art
roasting facility in China in 2022 as part of its new Coffee
Innovation Park (CIP). The CIP will incorporate a roasting plant,
warehouse and distribution center, driving smart and sustainable
coffee manufacturing in China. The $130 million investment in the
CIP is Starbucks largest coffee manufacturing investment outside of
the U.S. and the first in Asia, deepening Starbucks commitment to
strengthen the specialty coffee industry in China.
- Starbucks remains committed to a multi-decade sustainability
aspiration to be resource positive, giving more than it takes from
the planet. In early March, Starbucks began its first market tests
of a new recyclable and compostable hot cup solution, featuring a
BioPBS™ cup liner, in select stores in Seattle, San Francisco, New
York, Vancouver and London. This test is part of the NextGen Cup
Challenge which seeks to address single-use packaging waste by
developing an industry-wide to-go cup solution.
- In March, the company executed a $1.75 billion bond issuance,
with the use of proceeds earmarked for repayment of outstanding
commercial paper, backstopped by a $2 billion, 5-year credit
facility and $1 billion, 364-day credit facility. The company also
executed an additional $500 million term-loan facility.
- The Board of Directors declared a cash dividend of $0.41 per
share, payable on May 22, 2020, to shareholders of record as of May
8, 2020.
Conference Call
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
Patrick Grismer, 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 Friday, May 29, 2020.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to
ethically sourcing and roasting high-quality arabica coffee. Today,
with more than 32,000 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 stories.starbucks.com or
www.starbucks.com.
Forward-Looking
Statements
Certain statements contained herein and in our investor
conference call related to these results are “forward-looking”
statements within the meaning of the applicable securities laws and
regulations. Generally, these statements can be identified by the
use of words such as “anticipate,” “believe,” “confident,”
“continue,” “could,” “estimate,” “expect,” “forecast,” “intend,”
“may,” “outlook,” “plan,” “potential,” “predict,” “project,”
“remain,” “should,” “will,” “would,” and similar expressions
intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. These
statements include statements relating to: the estimated financial
impact of the temporary business disruption related to the current
outbreak of coronavirus disease (COVID-19) including the outlook,
guidance and projections for revenues, earnings per share,
operating income, operating margins, comparable store sales, net
new stores, capital expenditures, interest expense, G&A
expenses, quarterly and fiscal 2020 guidance and long-term G&A
expense guidance; the temporary nature of the impact of COVID-19 on
our business, operations and financial results; the anticipated
timing of recovery of business in any specific market, including
the ability to open and reopen stores with best-in-class safety
protocols; the ability to continue steady business improvement, add
new store locations and grow customer engagement; the ability to
leverage our experience in China to inform our actions in other
markets, including the U.S.; and our ability to emerge from this
global crisis. These forward-looking statements do not represent
historical data, are based on currently available operating,
financial and competitive information and are subject to a number
of significant risks and uncertainties. Actual future results and
trends may differ materially depending on a variety of factors,
including, but not limited to: further spread of COVID-19;
regulatory measures or voluntary actions that may be put in place
to limit the spread of COVID-19, including restrictions on business
operations or social distancing requirements, and the duration of
such restrictions; the potential for a resurgence of COVID-19
infections in a given geographic region after it has hit its
“peak”; fluctuations in U.S. and international economies and
currencies; our ability to preserve, grow and leverage our brands;
the ability of our business partners and third-party providers to
fulfill their responsibilities and commitments; 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 the East China business and
the successful expansion of our Global Coffee Alliance with Nestlé;
our ability to obtain financing on acceptable terms; the acceptance
of the company’s products by our customers, evolving consumer
preferences and tastes and the availability of consumer financing;
changes in the availability and cost of labor; the impact of
competition; inherent risks of operating a global business; the
prices and availability of coffee, dairy and other raw materials;
the effect of legal proceedings; the disruption to our business
related to COVID-19; and the effects of changes in tax laws 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” sections of
Starbucks Annual Report on Form 10-K for the fiscal year ended
September 29, 2019 and Starbucks Quarterly Report on Form 10-Q for
the fiscal quarter ended December 29, 2019. The company assumes no
obligation to update any of these forward-looking statements.
Non-GAAP Financial
Measures
Certain non-GAAP measures included in our press release and in
our investor conference call related to these results were not
reconciled to the comparable GAAP financial measures because the
GAAP measures are not accessible on a forward-looking basis. The
company is unable to reconcile these forward-looking non-GAAP
financial measures to the most directly comparable GAAP measures
without unreasonable efforts because the company is currently
unable to predict with a reasonable degree of certainty the type
and extent of certain items that would be expected to impact GAAP
measures for these periods but would not impact the non-GAAP
measures. Such items may include acquisitions, divestitures,
restructuring and other items. The unavailable information could
have a significant impact on the company’s GAAP financial
results.
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF
EARNINGS
(unaudited, in millions, except
per share data)
Quarter Ended
Quarter Ended
Mar 29, 2020
Mar 31, 2019
% Change
Mar 29, 2020
Mar 31, 2019
As a % of total net
revenues
Net revenues:
Company-operated stores
$
4,766.0
$
5,159.0
(7.6)
%
79.5
%
81.8
%
Licensed stores
689.8
678.2
1.7
11.5
10.8
Other
539.9
468.7
15.2
9.0
7.4
Total net revenues
5,995.7
6,305.9
(4.9)
100.0
100.0
Cost of sales
1,997.7
2,012.0
(0.7)
33.3
31.9
Store operating expenses
2,721.4
2,554.1
6.6
45.4
40.5
Other operating expenses
95.0
87.1
9.1
1.6
1.4
Depreciation and amortization expenses
356.3
356.2
—
5.9
5.6
General and administrative expenses
406.5
458.1
(11.3)
6.8
7.3
Restructuring and impairments
(0.7)
43.0
nm
—
0.7
Total operating expenses
5,576.2
5,510.5
1.2
93.0
87.4
Income from equity investees
67.9
62.3
9.0
1.1
1.0
Operating income
487.4
857.7
(43.2)
8.1
13.6
Net gain resulting from divestiture of
certain operations
—
21.0
nm
—
0.3
Interest income and other, net
2.0
15.2
(86.8)
—
0.2
Interest expense
(99.2)
(73.9)
34.2
(1.7)
(1.2)
Earnings before income taxes
390.2
820.0
(52.4)
6.5
13.0
Income tax expense
65.4
161.2
(59.4)
1.1
2.6
Net earnings including noncontrolling
interests
324.8
658.8
(50.7)
5.4
10.4
Net earnings/(loss) attributable to
noncontrolling interests
(3.6)
(4.4)
(18.2)
(0.1)
(0.1)
Net earnings attributable to
Starbucks
$
328.4
$
663.2
(50.5)
5.5
%
10.5
%
Net earnings per common share -
diluted
$
0.28
$
0.53
(47.2)
%
Weighted avg. shares outstanding -
diluted
1,180.7
1,250.7
Cash dividends declared per share
$
0.41
$
0.36
Supplemental Ratios:
Store operating expenses as a % of
company-operated store revenues
57.1
%
49.5
%
Effective tax rate including
noncontrolling interests
16.8
%
19.7
%
Two Quarters Ended
Two Quarters Ended
Mar 29, 2020
Mar 31, 2019
%
Change
Mar 29, 2020
Mar 31, 2019
As a % of total net
revenues
Net revenues:
Company-operated stores
$
10,546.6
$
10,529.3
0.2
%
80.6
%
81.4
%
Licensed stores
1,481.9
1,415.3
4.7
11.3
10.9
Other
1,064.3
994.1
7.1
8.1
7.7
Total net revenues
13,092.8
12,938.7
1.2
100.0
100.0
Cost of sales
4,234.2
4,187.8
1.1
32.3
32.4
Store operating expenses
5,542.9
5,140.9
7.8
42.3
39.7
Other operating expenses
196.7
184.9
6.4
1.5
1.4
Depreciation and amortization expenses
707.4
689.6
2.6
5.4
5.3
General and administrative expenses
840.7
906.0
(7.2)
6.4
7.0
Restructuring and impairments
5.6
86.2
(93.5)
—
0.7
Total operating expenses
11,527.5
11,195.4
3.0
88.0
86.5
Income from equity investees
141.9
130.1
9.1
1.1
1.0
Operating income
1,707.2
1,873.4
(8.9)
13.0
14.5
Net gain resulting from divestiture of
certain operations
—
21.0
nm
—
0.2
Interest income and other, net
18.0
39.9
(54.9)
0.1
0.3
Interest expense
(191.1)
(148.9)
28.3
(1.5)
(1.2)
Earnings before income taxes
1,534.1
1,785.4
(14.1)
11.7
13.8
Income tax expense
324.0
366.4
(11.6)
2.5
2.8
Net earnings including noncontrolling
interests
1,210.1
1,419.0
(14.7)
9.2
11.0
Net loss attributable to noncontrolling
interests
(4.0)
(4.6)
(13.0)
—
—
Net earnings attributable to
Starbucks
$
1,214.1
$
1,423.6
(14.7)
9.3
%
11.0
%
Net earnings per common share -
diluted
$
1.02
$
1.14
(10.5)
%
Weighted avg. shares outstanding -
diluted
1,185.8
1,252.1
Cash dividends declared per share
$
0.82
$
0.72
Supplemental Ratios:
Store operating expenses as a % of
company-operated store revenues
52.6
%
48.8
%
Effective tax rate including
noncontrolling interests
21.1
%
20.5
%
Segment Results (in
millions)
Americas
Mar 29, 2020
Mar 31, 2019
%
Change
Mar 29, 2020
Mar 31, 2019
Quarter
Ended
As a % of Americas total net
revenues
Net revenues:
Company-operated stores
$
3,863.6
$
3,849.6
0.4
%
89.2
%
89.2
%
Licensed stores
464.2
463.1
0.2
10.7
10.7
Other
2.2
1.4
57.1
0.1
—
Total net revenues
4,330.0
4,314.1
0.4
100.0
100.0
Cost of sales
1,248.2
1,220.5
2.3
28.8
28.3
Store operating expenses
2,158.6
1,935.7
11.5
49.9
44.9
Other operating expenses
41.8
39.4
6.1
1.0
0.9
Depreciation and amortization expenses
191.5
173.0
10.7
4.4
4.0
General and administrative expenses
68.2
70.9
(3.8)
1.6
1.6
Restructuring and impairments
0.5
18.2
(97.3)
—
0.4
Total operating expenses
3,708.8
3,457.7
7.3
85.7
80.1
Operating income
$
621.2
$
856.4
(27.5)
%
14.3
%
19.9
%
Supplemental Ratio:
Store operating expenses as a % of
company-operated store revenues
55.9
%
50.3
%
Two Quarters
Ended
Net revenues:
Company-operated stores
$
8,334.6
$
7,941.7
4.9
%
89.2
%
89.0
%
Licensed stores
1,001.5
977.7
2.4
10.7
11.0
Other
4.8
7.2
(33.3)
0.1
0.1
Total net revenues
9,340.9
8,926.6
4.6
100.0
100.0
Cost of sales
2,636.6
2,571.8
2.5
28.2
28.8
Store operating expenses
4,373.0
3,918.8
11.6
46.8
43.9
Other operating expenses
84.3
83.8
0.6
0.9
0.9
Depreciation and amortization expenses
380.7
339.9
12.0
4.1
3.8
General and administrative expenses
140.6
146.0
(3.7)
1.5
1.6
Restructuring and impairments
5.7
41.1
(86.1)
0.1
0.5
Total operating expenses
7,620.9
7,101.4
7.3
81.6
79.6
Operating income
$
1,720.0
$
1,825.2
(5.8)
%
18.4
%
20.4
%
Supplemental Ratio:
Store operating expenses as a % of
company-operated store revenues
52.5
%
49.3
%
International
Mar 29, 2020
Mar 31, 2019
%
Change
Mar 29, 2020
Mar 31, 2019
Quarter
Ended
As a % of International total
net revenues
Net revenues:
Company-operated stores
$
902.4
$
1,309.4
(31.1)
%
79.5
%
85.6
%
Licensed stores
225.6
215.1
4.9
19.9
14.1
Other
6.6
4.9
34.7
0.6
0.3
Total net revenues
1,134.6
1,529.4
(25.8)
100.0
100.0
Cost of sales
387.7
470.2
(17.5)
34.2
30.7
Store operating expenses
562.8
618.4
(9.0)
49.6
40.4
Other operating expenses
31.8
26.3
20.9
2.8
1.7
Depreciation and amortization expenses
130.0
130.4
(0.3)
11.5
8.5
General and administrative expenses
63.7
80.2
(20.6)
5.6
5.2
Restructuring and impairments
(1.2)
24.2
nm
(0.1)
1.6
Total operating expenses
1,174.8
1,349.7
(13.0)
103.5
88.3
Income from equity investees
24.8
22.1
12.2
2.2
1.4
Operating income/(loss)
$
(15.4)
$
201.8
nm
(1.4)
%
13.2
%
Supplemental Ratio:
Store operating expenses as a % of
company-operated store revenues
62.4
%
47.2
%
Two Quarters
Ended
Net revenues:
Company-operated stores
$
2,212.0
$
2,587.6
(14.5)
%
81.8
%
85.3
%
Licensed stores
480.4
437.6
9.8
17.8
14.4
Other
13.3
8.3
60.2
0.5
0.3
Total net revenues
2,705.7
3,033.5
(10.8)
100.0
100.0
Cost of sales
876.2
932.8
(6.1)
32.4
30.7
Store operating expenses
1,169.9
1,222.1
(4.3)
43.2
40.3
Other operating expenses
67.7
57.8
17.1
2.5
1.9
Depreciation and amortization expenses
256.7
257.3
(0.2)
9.5
8.5
General and administrative expenses
130.9
149.5
(12.4)
4.8
4.9
Restructuring and impairments
(0.4)
30.6
nm
—
1.0
Total operating expenses
2,501.0
2,650.1
(5.6)
92.4
87.4
Income from equity investees
55.8
48.5
15.1
2.1
1.6
Operating income
$
260.5
$
431.9
(39.7)
%
9.6
%
14.2
%
Supplemental Ratio:
Store operating expenses as a % of
company-operated store revenues
52.9
%
47.2
%
Channel Development
Mar 29, 2020
Mar 31, 2019
%
Change
Mar 29, 2020
Mar 31, 2019
Quarter
Ended
As a % of Channel
Development net revenues
Net revenues
$
519.1
$
446.6
16.2
%
Cost of sales
351.6
305.4
15.1
67.7
%
68.4
%
Other operating expenses
17.7
17.1
3.5
3.4
3.8
Depreciation and amortization expenses
0.3
12.3
(97.6)
0.1
2.8
General and administrative expenses
3.0
3.1
(3.2)
0.6
0.7
Total operating expenses
372.6
337.9
10.3
71.8
75.7
Income from equity investees
43.1
40.2
7.2
8.3
9.0
Operating income
$
189.6
$
148.9
27.3
%
36.5
%
33.3
%
Two Quarters
Ended
Net revenues
$
1,013.7
$
951.1
6.6
%
Cost of sales
690.4
653.8
5.6
68.1
%
68.7
%
Other operating expenses
38.3
35.7
7.3
3.8
3.8
Depreciation and amortization expenses
0.6
12.4
(95.2)
0.1
1.3
General and administrative expenses
5.4
6.2
(12.9)
0.5
0.7
Total operating expenses
734.7
708.1
3.8
72.5
74.5
Income from equity investees
86.1
81.6
5.5
8.5
8.6
Operating income
$
365.1
$
324.6
12.5
%
36.0
%
34.1
%
Corporate and Other
Mar 29, 2020
Mar 31, 2019
% Change
Quarter
Ended
Net revenues
$
12.0
$
15.8
(24.1)
%
Cost of sales
10.2
15.9
(35.8)
Other operating expenses
3.7
4.3
(14.0)
Depreciation and amortization expenses
34.5
40.5
(14.8)
General and administrative expenses
271.6
303.9
(10.6)
Restructuring and impairments
—
0.6
nm
Total operating expenses
320.0
365.2
(12.4)
Operating loss
$
(308.0)
$
(349.4)
(11.8)
%
Two Quarters
Ended
Net revenues
32.5
27.5
18.2
Cost of sales
31.0
29.4
5.4
Other operating expenses
6.4
7.6
(15.8)
Depreciation and amortization expenses
69.4
80.0
(13.3)
General and administrative expenses
563.8
604.3
(6.7)
Restructuring and impairments
0.3
14.5
(97.9)
Total operating expenses
670.9
735.8
(8.8)
Operating loss
$
(638.4)
$
(708.3)
(9.9)
%
Corporate and Other primarily consists of
our unallocated corporate operating expenses and Evolution
Fresh.
STARBUCKS CORPORATION
CONSOLIDATED BALANCE
SHEETS
(unaudited, in millions, except
per share data)
Mar 29, 2020
Sep 29, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
2,572.3
$
2,686.6
Short-term investments
52.9
70.5
Accounts receivable, net
941.0
879.2
Inventories
1,492.2
1,529.4
Prepaid expenses and other current
assets
691.5
488.2
Total current assets
5,749.9
5,653.9
Long-term investments
198.8
220.0
Equity investments
420.9
396.0
Property, plant and equipment, net
6,387.0
6,431.7
Operating lease, right-of-use asset
8,260.8
—
Deferred income taxes, net
1,709.7
1,765.8
Other long-term assets
580.1
479.6
Other intangible assets
678.7
781.8
Goodwill
3,493.0
3,490.8
TOTAL ASSETS
$
27,478.9
$
19,219.6
LIABILITIES AND SHAREHOLDERS'
EQUITY/(DEFICIT)
Current liabilities:
Accounts payable
$
997.7
$
1,189.7
Accrued liabilities
1,539.0
1,753.7
Accrued payroll and benefits
596.1
664.6
Income taxes payable
86.7
1,291.7
Current portion of operating lease
liability
1,253.5
—
Store value card liability and current
portion of deferred revenue
1,436.3
1,269.0
Short-term debt
1,107.1
—
Current portion of long-term debt
1,249.4
—
Total current liabilities
8,265.8
6,168.7
Long-term debt
11,658.7
11,167.0
Operating lease liability
7,650.4
—
Deferred revenue
6,685.5
6,744.4
Other long-term liabilities
751.4
1,370.5
Total liabilities
35,011.8
25,450.6
Shareholders’ equity/(deficit):
Common stock ($0.001 par value) —
authorized, 2,400.0 shares; issued and outstanding, 1,168.1 and
1,184.6 shares, respectively
1.2
1.2
Additional paid-in capital
41.1
41.1
Retained earnings/(deficit)
(7,050.6)
(5,771.2)
Accumulated other comprehensive loss
(521.8)
(503.3)
Total shareholders’ equity/(deficit)
(7,530.1)
(6,232.2)
Noncontrolling interests
(2.8)
1.2
Total equity/(deficit)
(7,532.9)
(6,231.0)
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY/(DEFICIT)
$
27,478.9
$
19,219.6
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited and in millions)
Two Quarters Ended
Mar 29, 2020
Mar 31, 2019
OPERATING ACTIVITIES:
Net earnings including noncontrolling
interests
$
1,210.1
$
1,419.0
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
746.9
723.5
Deferred income taxes, net
47.7
(714.5)
Income earned from equity method
investees
(116.3)
(108.2)
Distributions received from equity method
investees
98.1
93.3
Net gain resulting from divestiture of
certain retail operations
—
(21.0)
Stock-based compensation
146.6
192.1
Goodwill impairments
—
5.4
Non-cash lease costs
596.3
—
Other
67.7
91.1
Cash provided by changes in operating
assets and liabilities:
Accounts receivable
(60.7)
9.8
Inventories
36.9
(51.0)
Prepaid expenses and other current
assets
(247.7)
774.6
Income taxes payable
(1,227.4)
542.0
Accounts payable
(186.4)
(83.4)
Deferred revenue
112.1
9.4
Operating lease liability
(608.6)
—
Other operating assets and liabilities
(140.5)
(112.7)
Net cash provided by operating
activities
474.8
2,769.4
INVESTING ACTIVITIES:
Purchases of investments
(65.1)
(150.2)
Sales of investments
93.7
218.3
Maturities and calls of investments
4.3
55.1
Additions to property, plant and
equipment
(758.3)
(845.6)
Net proceeds from the divestiture of
certain operations
—
48.5
Other
(22.5)
(37.1)
Net cash used in investing activities
(747.9)
(711.0)
FINANCING ACTIVITIES:
Net proceeds from issuance of commercial
paper
613.0
75.0
Proceeds from issuance of commercial paper
(maturities longer than 90 days)
494.1
—
Proceeds from issuance of long-term
debt
1,739.7
—
Repayments of long-term debt
—
(350.0)
Proceeds from issuance of common stock
65.4
275.7
Cash dividends paid
(965.2)
(894.5)
Repurchase of common stock
(1,698.9)
(7,827.9)
Minimum tax withholdings on share-based
awards
(87.6)
(56.3)
Other
(10.4)
0.1
Net cash provided by/(used in) financing
activities
150.1
(8,777.9)
Effect of exchange rate changes on cash
and cash equivalents
8.7
18.3
Net decrease in cash and cash
equivalents
(114.3)
(6,701.2)
CASH AND CASH EQUIVALENTS:
Beginning of period
2,686.6
8,756.3
End of period
$
2,572.3
$
2,055.1
Supplemental
Information
The following supplemental information is provided for
historical and comparative purposes.
U.S. Supplemental
Data
Quarter Ended
($ in millions)
Mar 29, 2020
Mar 31, 2019
Change (%)
Revenues
$3,979.6
$3,955.3
1%
Comparable Store Sales Growth (1)
(3)%
4%
Change in Transactions
(7)%
0%
Change in Ticket
5%
4%
Store Count
15,257
14,787
3%
(1)
Includes only Starbucks® company-operated
stores open 13 months or longer. The results from Siren Retail
operations are not reflected in comparable store sales. Comparable
store sales include stores that were temporarily closed as a result
of the COVID-19 outbreak.
China Supplemental Data
Quarter Ended
($ in millions)
Mar 29, 2020
Mar 31, 2019
Change (%)
Revenues
$384.0
$708.6
(46)%
Comparable Store Sales Growth (1)
(50)%
2%
Change in Transactions
(53)%
(1)%
Change in Ticket
6%
3%
Store Count
4,351
3,791
15%
(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 and Siren
Retail stores. Comparable store sales include stores that were
temporarily closed as a result of the COVID-19 outbreak.
Store Data
Net stores opened/(closed) and
transferred during the period
Quarter Ended
Two Quarters Ended
Stores open as of
Mar 29, 2020
Mar 31, 2019
Mar 29, 2020
Mar 31, 2019
Mar 29, 2020
Mar 31, 2019
Americas:
Company-operated stores
31
(1)
77
86
10,051
9,776
Licensed stores
37
67
127
173
8,220
7,943
Total Americas
68
66
204
259
18,271
17,719
International:
Company-operated stores
78
40
277
228
6,137
5,879
Licensed stores
109
213
313
385
7,642
6,586
Total International
187
253
590
613
13,779
12,465
Corporate and Other(1):
Licensed stores
—
—
—
(12)
—
—
Total Corporate and Other
—
—
—
(12)
—
—
Total Company
255
319
794
860
32,050
30,184
(1)
Corporate and Other store data includes
the closure of 12 Teavana® retail stores in the first quarter of
fiscal 2019.
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 G&A, non-GAAP operating income, non-GAAP
operating income growth, non-GAAP operating margin, non-GAAP
effective tax rate and non-GAAP EPS exclude the below-listed items
and their related tax impacts, 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 G&A,
non-GAAP operating income, non-GAAP operating income growth,
non-GAAP operating margin, non-GAAP effective tax rate and non-GAAP
EPS are general and administrative expenses, operating income,
operating income growth, operating margin, effective tax rate and
diluted net earnings per share, respectively.
Non-GAAP
Exclusion
Rationale
Gain on sale of certain retail
operations
Management excludes the gains related to
the sale of our retail operations in France and the Netherlands as
these items do not reflect future gains or tax impacts for reasons
discussed above.
Restructuring, impairment and optimization
costs
Management excludes restructuring charges
and business process optimization costs related to U.S.,
International and other business units. Additionally, management
excludes expenses related to divesting certain lower-margin
businesses and assets, such as closure of certain company-operated
stores. Management excludes these items for reasons discussed
above. These expenses are anticipated to be completed within a
finite period of time.
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.
2018 U.S. stock award
Management excludes the incremental
stock-based compensation award granted in the third quarter of
fiscal 2018 for reasons discussed above.
Nestlé transaction and integration-related
costs
Management excludes the transaction and
integration-related costs related to the Global Coffee Alliance
with Nestlé (inclusive of incremental costs to grow and develop the
alliance) for reasons discussed above.
Non-GAAP G&A, non-GAAP operating income, non-GAAP operating
income growth, non-GAAP operating margin, non-GAAP effective tax
rate 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 CORPORATION
RECONCILIATION OF SELECTED
GAAP MEASURES TO NON-GAAP MEASURES
(unaudited)
($ in millions)
Quarter Ended
Consolidated
Mar 29, 2020
Mar 31, 2019
Change
General and administrative expenses, as
reported (GAAP)
$
406.5
$
458.1
(11.3)%
Restructuring, impairment and optimization
costs (1)
(0.6)
(1.4)
International transaction and
integration-related items (2)
(2.3)
(10.5)
2018 U.S. stock award (3)
—
(23.8)
Nestlé transaction and integration-related
costs
(0.2)
(0.6)
Non-GAAP G&A
$
403.4
$
421.8
(4.4)%
Non-GAAP G&A as a % of total net
revenues (4)
6.7
%
6.7
%
Operating income, as reported (GAAP)
$
487.4
$
857.7
(43.2)%
Restructuring, impairment and optimization
costs (1)
(0.1)
45.1
International transaction and
integration-related items (2)
60.1
68.2
2018 U.S. stock award (3)
—
23.8
Nestlé transaction and integration-related
costs
6.8
4.3
Non-GAAP operating income
$
554.2
$
999.1
(44.5)%
Operating margin, as reported (GAAP)
8.1
%
13.6
%
(550) bps
Restructuring, impairment and optimization
costs (1)
—
0.7
International transaction and
integration-related items (2)
1.0
1.0
2018 U.S. stock award (3)
—
0.4
Nestlé transaction and integration-related
costs
0.1
0.1
Non-GAAP operating margin
9.2
%
15.8
%
(660) bps
Diluted net earnings per share, as
reported (GAAP)
$
0.28
$
0.53
(47.2)%
Gain on sale of certain retail
operations
—
(0.02)
Restructuring, impairment and optimization
costs (1)
—
0.04
International transaction and
integration-related items (2)
0.05
0.05
2018 U.S. stock award (3)
—
0.02
Nestlé transaction and integration-related
costs
0.01
—
Income tax effect on Non-GAAP adjustments
(5)
(0.02)
(0.02)
Non-GAAP EPS
$
0.32
$
0.60
(46.7)%
(1)
Represents costs associated with our
restructuring efforts, primarily severance and asset impairments
related to certain company-operated store closures, as well as
business process optimization costs, largely consulting fees.
(2)
Includes transaction costs for the
acquisition of our East China joint venture; ongoing amortization
expense of acquired intangible assets associated with the
acquisition of East China and Starbucks Japan; and the related
post-acquisition integration costs, such as incremental information
technology and compensation-related costs.
(3)
Represents incremental stock-based
compensation award for U.S. partners (employees).
(4)
Non-GAAP G&A as a percentage of total
net revenues for the second quarter of fiscal 2020 was 6.7%.
Non-GAAP G&A as a percentage of total net revenues for fiscal
years 2019 and 2018 was 6.5% and 6.4%, respectively. Refer to the
Starbucks Investor Relations website for additional information
regarding historical non-GAAP information.
(5)
Adjustments were determined based on the
nature of the underlying items and their relevant jurisdictional
tax rates.
Q2 QTD FY20 NON-GAAP DISCLOSURE DETAILS
(Pretax $ in millions and
USD)
Q2 QTD FY20
Americas
International
Channel Development
Corporate and Other
Consolidated
Statement of Earnings Line Item
Restructuring, Impairment and
Optimization Costs
International Transaction and
Integration Costs
Restructuring, Impairment and
Optimization Costs
Nestlé Transaction and
Integration-Related Costs
International Transaction and
Integration Costs
Nestlé Transaction and
Integration-Related Costs
Restructuring, Impairment
& Optimization Costs
Total Non-GAAP
Adjustment
Net revenue
Cost of sales
Store operating expenses
4.2
4.2
Other operating expenses
6.6
6.6
Depreciation and amortization expenses
53.6
53.6
General and administrative expenses
2.2
0.5
0.1
0.2
0.1
3.1
Restructuring and impairments
0.5
(1.2
)
(0.7
)
Income from equity investees
Total impact to operating income
(0.5
)
(60.0
)
0.7
(6.6
)
(0.1
)
(0.2
)
(0.1
)
(66.8
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200428005978/en/
Starbucks Contact, Investor Relations: Durga Doraisamy
206-318-7118 investorrelations@starbucks.com
Starbucks Contact, Media: Reggie Borges 206-318-7100
press@starbucks.com
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