Q2 Comparable Store Sales Up 3% Globally,
Driven by 4% Comp Growth in the U.S. and 3% Comp Growth in
China
Global Net Store Growth of 7% Versus Prior
Year, Led by 17% Net Store Growth in China
Global Retail Business Surpasses 30,000
Stores
GAAP EPS of $0.53; Non-GAAP EPS of $0.60, Up
13% Year-Over-Year
Active Starbucks® Rewards Membership in the
U.S. Increases 13% Year-Over-Year to 16.8 Million
Starbucks Corporation (NASDAQ: SBUX) today reported financial
results for its 13-week fiscal second quarter ended March 31,
2019. GAAP results in fiscal 2019 and fiscal 2018 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.
“Starbucks delivered another quarter of solid operating results,
demonstrating that our ‘Growth at Scale’ agenda is working,”
said Kevin Johnson, president and ceo. “We are
especially pleased with our comparable store sales growth in
our two lead markets, the U.S. and China, where we are also
continuing to drive strong new store development with
industry-leading returns. With solid first-half financial
results, we are on track to deliver on our full-year
commitments.”
“Starbucks remains focused and disciplined in the execution of
our three key strategic priorities: accelerating growth in our
targeted markets of the U.S. and China, expanding the global reach
of the Starbucks brand through our Global Coffee Alliance with
Nestlé, and increasing shareholder returns. With our efforts to
streamline the company and elevate the Starbucks brand, we are not
only positioning the company to deliver more predictable and
sustainable operating results but are also building Starbucks to be
an enduring company that creates meaningful value for shareholders
for decades to come,” concluded Johnson.
Q2 Fiscal 2019
Highlights
- Global comparable store sales increased
3%, driven by a 3% increase in average ticket
- Americas and U.S. comparable store
sales increased 4%, driven by a 4% increase in average ticket
- China/Asia Pacific comparable store
sales increased 2%, driven by a 2% increase in average ticket;
China comparable store sales increased 3%, with comparable
transactions down 1%
- The company opened 319 net new stores
in Q2, yielding 30,184 stores at the end of the quarter, a 7%
increase over the prior year. 94% of net new store openings were
outside of the U.S. while 88% were licensed
- Consolidated net revenues of $6.3
billion grew 5% over the prior year
- Consolidated net revenues grew 9% over
the prior year adjusted for approximately 3% of net reduction from
Streamline-driven activities and a 1% headwind from unfavorable
foreign currency translation
- Streamline-driven activities include
the licensing of our CPG and foodservice businesses to Nestlé
following the close of the deal on August 26, 2018, and the
conversion of certain international retail operations from
company-operated to licensed models
- GAAP operating margin, inclusive of
restructuring and impairment charges, increased 80 basis points
year-over-year to 13.6%, primarily due to lower restructuring and
impairment charges, the beneficial impact of cost savings
initiatives, sales leverage, and new revenue recognition accounting
for stored value card (SVC) breakage, partially offset by
Streamline-driven activities and partner (employee) and other
strategic investments
- Non-GAAP operating margin of 15.8%
declined 40 basis points compared to the prior year. Excluding an
80-basis point unfavorable impact from Streamline-related
activities, non-GAAP operating margin expanded by approximately 40
basis points
- GAAP Earnings Per Share of $0.53, up
13% over the prior year
- Non-GAAP EPS of $0.60, up 13% over the
prior year, including a $0.01 benefit from discrete income tax
items
- The company returned $3.2 billion to
shareholders through a combination of share repurchases and
dividends
- Starbucks® Rewards loyalty program grew
to 16.8 million active members in the U.S., up 13%
year-over-year
Q2 Americas
Segment Results
Quarter Ended Change (%) ($ in
millions)
Mar 31, 2019 Apr 1,
2018 Comparable Store Sales Growth (1) 4%
2% Change in Transactions 0% 0% Change in Ticket 4% 3% Store
Count 17,710 17,024 4% Revenues $4,305.9 $3,996.3 8% Operating
Income $899.0 $801.3 12% Operating Margin 20.9%
20.1% 80 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.
Net revenues for the Americas segment grew 8% over Q2 FY18 to
$4.3 billion in Q2 FY19, primarily driven by 686 net new store
openings, or 4% store growth, over the past 12 months and 4% growth
in comparable store sales.
Operating income grew 12% to $899.0 million in Q2 FY19, up from
$801.3 million in Q2 FY18. Operating margin of 20.9% increased 80
basis points, primarily due to sales leverage, cost savings
initiatives, and new revenue recognition accounting for SVC
breakage, partially offset by partners (employees) investments
funded by savings from the U.S. tax law changes and growth in wages
and benefits.
Q2 China/Asia
Pacific Segment Results
Quarter Ended Change (%) ($ in
millions)
Mar 31, 2019 Apr 1,
2018 Comparable Store Sales Growth (1) 2%
3% Change in Transactions 0% 0% Change in Ticket 2% 3% Store
Count 8,993 7,995 12% Revenues $1,289.1 $1,186.4 9% Operating
Income $231.7 $204.6 13% Operating Margin 18.0%
17.2% 80 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.
Net revenues for the China/Asia Pacific segment grew 9% over Q2
FY18 to $1.3 billion in Q2 FY19, primarily driven by 998 net new
store openings, or 12% store growth, over the past 12 months, and a
2% increase in comparable store sales.
Q2 FY19 operating income of $231.7 million grew 13% over Q2 FY18
operating income of $204.6 million. Operating margin increased 80
basis points to 18.0%, primarily due to sales leverage and cost
savings initiatives.
Q2 EMEA Segment
Results
Quarter Ended Change (%) ($ in
millions)
Mar 31, 2019 Apr 1,
2018 Comparable Store Sales (1) (2) 2%
(1)% Change in Transactions 0% (4)% Change in Ticket 2% 3%
Store Count 3,468 3,161 10% Revenues $227.5 $251.0 (9)% Operating
Loss ($2.8) ($10.9) (74)% Operating Margin (1.2)%
(4.3)% 310 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. (2) Company-operated stores
represent 11% of the EMEA segment store portfolio as of March 31,
2019.
Net revenues for the EMEA segment declined 9% from Q2 FY18 to
$227.5 million in Q2 FY19 due to unfavorable foreign currency
translation and the conversion of our France and Netherlands retail
businesses to fully licensed operations in Q2 FY19, partially
offset by 307 net new store openings, or 10% store growth, over the
past 12 months.
EMEA’s operating loss of $2.8 million in Q2 FY19 was 74% lower
versus an operating loss of $10.9 million in Q2 FY18. Operating
margin increased 310 basis points to (1.2)%, primarily due to the
shift in the portfolio towards more licensed stores and the closure
of certain company-operated stores.
Q2 Channel
Development Segment Results
Quarter Ended Change (%) ($ in
millions)
Mar 31, 2019 Apr 1,
2018 Revenues $446.6 $562.6 (21)%
Operating Income $149.0 $234.0 (36)% Operating Margin
33.4% 41.6% (820) bps
Net revenues for the Channel Development segment of $446.6
million in Q2 FY19 decreased 21% versus Q2 FY18, primarily due to
licensing our CPG and foodservice businesses to Nestlé following
the close of the deal on August 26, 2018.
Operating income of $149.0 million in Q2 FY19 declined 36%
compared to Q2 FY18. Operating margin declined 820 basis points to
33.4%, primarily due to licensing our CPG and foodservice
businesses to Nestlé and support costs related to the Global Coffee
Alliance.
Fiscal 2019 Guidance
The company updates the following fiscal year 2019 guidance (all
growth targets are relative to fiscal year 2018 non-GAAP measures
unless specified):
- Americas operating margin up slightly
(previously down slightly)
- Channel Development operating margin in
mid-30% range (previously high-30% range)
- GAAP tax rate in the range of 20% to
22% (previously 21% to 23%) and non-GAAP tax rate in the range of
19% to 21% (previously 20% to 22%)
- GAAP EPS in the range of $2.40 to $2.44
(previously $2.32 to $2.37)
- Non-GAAP EPS in the range of $2.75 to
$2.79 (previously $2.68 to $2.73)
The company reiterates the following fiscal year 2019 guidance
(all growth targets are relative to fiscal year 2018 non-GAAP
measures unless specified):
- Global comparable store sales growth
between 3% and 4%
- Approximately 2,100 net new Starbucks
stores globally
- Americas over 600
- CAP ~1,100 (nearly 600 in China)
- EMEA ~400 (virtually all licensed)
- Consolidated GAAP revenue growth of 5%
to 7%
- Includes approximately 2% net negative
impact related to Streamline-driven activities
- Consolidated operating margin down
moderately
- CAP operating margin roughly flat
- EMEA operating margin improving over
the course of 2019
- Capital expenditures ~$2.0 billion
Long-term General and Administrative
Expense (G&A) Guidance
The company reaffirms and clarifies its commitment to G&A
reduction:
- Non-GAAP G&A as a percentage of
system sales down 100 basis points over a three-year period,
resulting in FY21 non-GAAP G&A at approximately $1.7 billion
- GAAP G&A in FY18 was $1.76 billion
and non-GAAP G&A was $1.65 billion
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
- In February, Starbucks opened its fifth
roastery in Tokyo, Japan. The Starbucks Reserve RoasteryTM Tokyo is
an immersive four-story tribute to premium coffee quality and
innovation. This one-of-a-kind space reaffirms the company’s
23-year commitment to Japan, its first international market outside
of North America.
- In February, Starbucks and Closed Loop
Partners announced 12 finalists in the NextGen Cup Challenge. The
Challenge is the first stage of the NextGen Consortium’s three-year
effort to create a widely recyclable and/or compostable cup,
demonstrating a commitment to reducing cup waste and driving
innovation in food packaging.
- In March, Starbucks announced its
pioneering investment in the new fund, Valor Siren Ventures I L.P.
(VSV), which is expected to serve as a growth driver for the next
generation of food and retail start-up technology companies. The
company has committed to a cornerstone investment of $100 million,
and VSV will raise an additional $300 million from other strategic
partners and key institutional investors.
- In March, Starbucks confirmed that it
has maintained race and gender pay equity for the second
consecutive year in the U.S., and that China and Canada are the
first two international markets to fulfill the company’s commitment
to global gender pay equity.
- In March, Starbucks celebrated the
opening of its 30,000th store in Shenzhen, China, marking a
significant global milestone for the company which started with a
single storefront in Seattle, Washington.
- The company repurchased 37.4 million
shares of common stock in Q2 FY19; approximately 59.5 million
shares remain available for purchase under current
authorizations.
- The Board of Directors declared a cash
dividend of $0.36 per share, payable on May 24, 2019, to
shareholders of record as of May 9, 2019.
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 24, 2019.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to
ethically sourcing and roasting high-quality arabica coffee. Today,
with more than 30,000 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 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,” “expect,” “believe,” “could,”
“estimate,” “feel,” “forecast,” “intend,” “may,” “plan,”
“potential,” “project,” “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
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 impacts, benefits, goals and
expectations of our Streamline initiatives, the execution of our
Growth-at-Scale agenda, with a focus on our long-term growth
markets of the U.S. and China, expanding the global reach of the
Starbucks brand through our Global Coffee Alliance with Nestlé, and
increasing shareholder returns, being on track to deliver on our
full-year commitments, driving predictable, sustainable results and
creating meaningful value for shareholders for decades to come,
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, capital expenditures, G&A
expenses, tax rates and our fiscal 2019 financial targets. 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 and the East China
business and successful execution of our Global Coffee Alliance
with Nestlé, the acceptance of the company’s products by our
customers, our ability to obtain financing on acceptable terms, the
impact of competition, the prices and availability of coffee, dairy
and other raw materials, the effect of legal proceedings, the
effects of changes in U.S. tax law 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 September 30, 2018. 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 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 31, Apr 1,
% Mar 31, Apr 1, 2019
2018 Change 2019
2018 As a % of total net revenues Net
revenues: Company-operated stores $ 5,159.0 $ 4,828.0 6.9 % 81.8 %
80.0 % Licensed stores 678.2 625.6 8.4 10.8 10.4 Other 468.7
578.2 (18.9 ) 7.4 9.6
Total net
revenues 6,305.9 6,031.8 4.5 100.0
100.0 Cost of sales including occupancy costs 2,603.8
2,514.7 3.5 41.3 41.7 Store operating expenses 1,949.6 1,789.6 8.9
30.9 29.7 Other operating expenses 82.3 120.8 (31.9 ) 1.3 2.0
Depreciation and amortization expenses 356.2 331.6 7.4 5.6 5.5
General and administrative expenses 475.6 420.6 13.1 7.5 7.0
Restructuring and impairments 43.0 134.7 (68.1 ) 0.7
2.2 Total operating expenses 5,510.5 5,312.0 3.7 87.4
88.1 Income from equity investees 62.3 52.7 18.2 1.0
0.9
Operating income 857.7 772.5
11.0 13.6 12.8 Gain resulting from acquisition
of joint venture — 47.6 nm — 0.8 Net gain/(loss) resulting from
divestiture of certain operations 21.0 (4.9 ) nm 0.3 (0.1 )
Interest income and other, net 15.2 35.5 (57.2 ) 0.2 0.6 Interest
expense (73.9 ) (35.1 ) 110.5 (1.2 ) (0.6 ) Earnings before income
taxes 820.0 815.6 0.5 13.0 13.5 Income tax expense 161.2
155.8 3.5 2.6 2.6 Net earnings including
noncontrolling interests 658.8 659.8 (0.2 ) 10.4 10.9 Net loss
attributable to noncontrolling interests (4.4 ) (0.3 ) nm (0.1 ) —
Net earnings attributable to Starbucks $
663.2 $ 660.1 0.5
10.5 % 10.9 % Net earnings per
common share - diluted $ 0.53 $
0.47 12.8 % Weighted avg. shares
outstanding - diluted 1,250.7 1,406.6 Cash dividends declared per
share $ 0.36 $ 0.30
Supplemental Ratios: Store operating
expenses as a % of company-operated store revenues 37.8 % 37.1 %
Effective tax rate including noncontrolling interests 19.7 % 19.1 %
Two Quarters Ended Two
Quarters Ended Mar 31, Apr 1,
% Mar 31, Apr 1,
2019 2018 Change
2019 2018 As a % of total net
revenues Net revenues: Company-operated stores $ 10,529.3 $
9,569.8 10.0 % 81.4 % 79.1 % Licensed stores 1,415.3 1,308.0 8.2
10.9 10.8 Other 994.1 1,227.7 (19.0 ) 7.7 10.1
Total net revenues 12,938.7 12,105.5
6.9 100.0 100.0 Cost of sales including
occupancy costs 5,362.5 5,016.4 6.9 41.4 41.4 Store operating
expenses 3,942.6 3,526.5 11.8 30.5 29.1 Other operating expenses
175.6 250.3 (29.8 ) 1.4 2.1 Depreciation and amortization expenses
689.6 590.4 16.8 5.3 4.9 General and administrative expenses 938.9
813.1 15.5 7.3 6.7 Restructuring and impairments 86.2 162.3
(46.9 ) 0.7 1.3 Total operating expenses
11,195.4 10,359.0 8.1 86.5 85.6 Income from equity investees 130.1
142.1 (8.4 ) 1.0 1.2
Operating
income 1,873.4 1,888.6 (0.8 )
14.5 15.6 Gain resulting from acquisition of joint
venture — 1,373.9 nm — 11.3 Net gain resulting from divestiture of
certain operations 21.0 496.3 nm 0.2 4.1 Interest income and other,
net 39.9 123.7 (67.7 ) 0.3 1.0 Interest expense (148.9 ) (61.0 )
144.1 (1.2 ) (0.5 ) Earnings before income taxes 1,785.4 3,821.5
(53.3 ) 13.8 31.6 Income tax expense 366.4 911.6
(59.8 ) 2.8 7.5 Net earnings including noncontrolling
interests 1,419.0 2,909.9 (51.2 ) 11.0 24.0 Net loss attributable
to noncontrolling interests (4.6 ) (0.4 ) nm — —
Net earnings attributable to Starbucks $
1,423.6 $ 2,910.3 (51.1
) 11.0 % 24.0 % Net earnings
per common share - diluted $ 1.14 $
2.05 (44.4 )% Weighted avg. shares
outstanding - diluted 1,252.1 1,420.5 Cash dividends declared per
share $ 0.72 $ 0.60
Supplemental Ratios: Store operating
expenses as a % of company-operated store revenues 37.4 % 36.9 %
Effective tax rate including noncontrolling interests 20.5 % 23.9 %
Segment Results (in
millions)
Americas
Mar 31, Apr 1, % Mar
31, Apr 1, 2019 2018
Change 2019 2018
Quarter
Ended
As a % of Americastotal net
revenues
Net revenues: Company-operated stores $ 3,841.4 $ 3,564.8 7.8 %
89.2 % 89.2 % Licensed stores 463.0 429.3 7.8 10.8 10.7 Other 1.5
2.2 (31.8 ) — 0.1
Total net
revenues 4,305.9 3,996.3 7.7 100.0
100.0 Cost of sales including occupancy costs 1,589.1
1,528.0 4.0 36.9 38.2 Store operating expenses 1,534.9 1,411.8 8.7
35.6 35.3 Other operating expenses 38.8 33.9 14.5 0.9 0.8
Depreciation and amortization expenses 170.7 160.4 6.4 4.0 4.0
General and administrative expenses 55.2 60.0 (8.0 ) 1.3 1.5
Restructuring and impairments 18.2 0.9 nm 0.4
— Total operating expenses 3,406.9 3,195.0 6.6
79.1 79.9
Operating income $
899.0 $ 801.3 12.2
% 20.9 % 20.1 % Supplemental
Ratio: Store operating expenses as a % of company-operated
store revenues 40.0 % 39.6 %
Two Quarters
Ended
Net revenues: Company-operated stores $ 7,927.2 $ 7,351.8 7.8 %
88.9 % 89.1 % Licensed stores 977.6 896.0 9.1 11.0 10.9 Other 7.2
6.1 18.0 0.1 0.1
Total net
revenues 8,912.0 8,253.9 8.0 100.0
100.0 Cost of sales including occupancy costs 3,301.4
3,124.1 5.7 37.0 37.8 Store operating expenses 3,126.0 2,845.3 9.9
35.1 34.5 Other operating expenses 82.9 72.5 14.3 0.9 0.9
Depreciation and amortization expenses 336.4 318.4 5.7 3.8 3.9
General and administrative expenses 113.4 112.1 1.2 1.3 1.4
Restructuring and impairments 41.1 2.5 nm 0.5
— Total operating expenses 7,001.2 6,474.9 8.1
78.6 78.4
Operating income $
1,910.8 $ 1,779.0 7.4
% 21.4 % 21.6 % Supplemental
Ratio: Store operating expenses as a % of company-operated
store revenues 39.4 % 38.7 %
China/Asia Pacific (CAP)
Mar 31, Apr 1, % Mar 31,
Apr 1, 2019 2018
Change 2019 2018
Quarter
Ended
As a % of CAP
total net revenues
Net revenues: Company-operated stores $ 1,185.5 $ 1,098.6 7.9 %
92.0 % 92.6 % Licensed stores 99.2 84.3 17.7 7.7 7.1 Other 4.4
3.5 25.7 0.3 0.3
Total net
revenues 1,289.1 1,186.4 8.7 100.0
100.0 Cost of sales including occupancy costs 547.2 511.2
7.0 42.4 43.1 Store operating expenses 346.1 306.5 12.9 26.8 25.8
Other operating expenses 5.2 5.1 2.0 0.4 0.4 Depreciation and
amortization expenses 121.4 121.6 (0.2 ) 9.4 10.2 General and
administrative expenses 59.6 54.1 10.2 4.6 4.6
Total operating expenses 1,079.5 998.5 8.1 83.7 84.2 Income
from equity investees 22.1 16.7 32.3 1.7 1.4
Operating income $ 231.7
$ 204.6 13.2 % 18.0
% 17.2 % Supplemental Ratio: Store
operating expenses as a % of company-operated store revenues 29.2 %
27.9 %
Two Quarters
Ended
Net revenues: Company-operated stores $ 2,309.8 $ 1,841.1 25.5 %
91.8 % 90.7 % Licensed stores 199.3 182.6 9.1 7.9 9.0 Other 7.4
6.3 17.5 0.3 0.3
Total net
revenues 2,516.5 2,030.0 24.0 100.0
100.0 Cost of sales including occupancy costs 1,072.2 883.5
21.4 42.6 43.5 Store operating expenses 672.9 525.1 28.1 26.7 25.9
Other operating expenses 13.2 14.1 (6.4 ) 0.5 0.7 Depreciation and
amortization expenses 238.2 175.3 35.9 9.5 8.6 General and
administrative expenses 114.8 98.1 17.0 4.6 4.8 Restructuring and
impairments 0.6 — nm — — Total
operating expenses 2,111.9 1,696.1 24.5 83.9 83.6 Income from
equity investees 48.5 67.5 (28.1 ) 1.9 3.3
Operating income $ 453.1
$ 401.4 12.9 % 18.0
% 19.8 % Supplemental Ratio: Store
operating expenses as a % of company-operated store revenues 29.1 %
28.5 %
EMEA
Mar 31, Apr 1, % Mar 31,
Apr 1, 2019 2018
Change 2019 2018
Quarter
Ended
As a % of EMEAtotal net
revenues
Net revenues: Company-operated stores $ 111.1 $ 138.7 (19.9 )% 48.8
% 55.3 % Licensed stores 116.0 112.0 3.6 51.0 44.6 Other 0.4
0.3 33.3 0.2 0.1
Total net revenues
227.5 251.0 (9.4 ) 100.0
100.0 Cost of sales including occupancy costs 120.4 138.4
(13.0 ) 52.9 55.1 Store operating expenses 47.0 57.7 (18.5 ) 20.7
23.0 Other operating expenses 16.8 18.3 (8.2 ) 7.4 7.3 Depreciation
and amortization expenses 6.9 8.0 (13.8 ) 3.0 3.2 General and
administrative expenses 15.1 11.0 37.3 6.6 4.4 Restructuring and
impairments 24.1 28.5 (15.4 ) 10.6 11.4
Total operating expenses 230.3 261.9 (12.1 ) 101.2
104.3
Operating loss $ (2.8
) $ (10.9 ) (74.3 )%
(1.2 )% (4.3 )% Supplemental
Ratio: Store operating expenses as a % of company-operated
store revenues 42.3 % 41.6 %
Two Quarters
Ended
Net revenues: Company-operated stores $ 254.6 $ 290.2 (12.3 )% 51.6
% 55.9 % Licensed stores 238.4 228.2 4.5 48.3 44.0 Other 0.8
0.6 33.3 0.2 0.1
Total net revenues
493.8 519.0 (4.9 ) 100.0
100.0 Cost of sales including occupancy costs 257.4 283.5
(9.2 ) 52.1 54.6 Store operating expenses 103.3 112.4 (8.1 ) 20.9
21.7 Other operating expenses 36.3 32.7 11.0 7.4 6.3 Depreciation
and amortization expenses 14.7 15.5 (5.2 ) 3.0 3.0 General and
administrative expenses 27.9 25.0 11.6 5.7 4.8 Restructuring and
impairments 30.0 28.5 5.3 6.1 5.5 Total
operating expenses 469.6 497.6 (5.6 ) 95.1
95.9
Operating income $ 24.2
$ 21.4 13.1 % 4.9
% 4.1 % Supplemental Ratio: Store
operating expenses as a % of company-operated store revenues 40.6 %
38.7 %
Channel Development
Mar 31, Apr 1, % Mar 31,
Apr 1, 2019 2018
Change 2019 2018
Quarter
Ended
As a % ofChannel Development net revenues Net
revenues $ 446.6 $ 562.6 (20.6 )% Cost of sales 305.4 302.8 0.9
68.4 % 53.8 % Other operating expenses 17.0 58.1 (70.7 ) 3.8 10.3
Depreciation and amortization expenses 12.3 0.3 nm 2.8 0.1 General
and administrative expenses 3.1 3.4 (8.8 ) 0.7 0.6
Total operating expenses 337.8 364.6 (7.4 ) 75.6 64.8
Income from equity investees
40.2 36.0 11.7 9.0 6.4
Operating income
$ 149.0 $ 234.0 (36.3 )%
33.4 % 41.6 %
Two Quarters
Ended
Net revenues $ 951.1 $ 1,190.6 (20.1 )% Cost of sales 653.8 633.5
3.2 68.7 % 53.2 % Other operating expenses 35.7 120.5 (70.4 ) 3.8
10.1 Depreciation and amortization expenses 12.4 0.9 nm 1.3 0.1
General and administrative expenses 6.2 6.9 (10.1 ) 0.7 0.6
Total operating expenses 708.1 761.8 (7.0 ) 74.5 64.0 Income
from equity investees 81.6 74.6 9.4 8.6 6.3
Operating income $ 324.6 $ 503.4
(35.5 )% 34.1 % 42.3 %
Corporate and Other
Mar 31, Apr 1, %
Quarter
Ended
2019 2018 Change
Net revenues: Company-operated stores $ 21.0 $ 25.9 (18.9 )% Other
15.8 9.6 64.6
Total net revenues 36.8
35.5 3.7 Cost of sales including occupancy costs 41.7
34.3 21.6 Store operating expenses 21.6 13.6 58.8 Other operating
expenses 4.5 5.4 (16.7 ) Depreciation and amortization expenses
44.9 41.3 8.7 General and administrative expenses 342.6 292.1 17.3
Restructuring and impairments 0.7 105.3 (99.3 ) Total
operating expenses 456.0 492.0 (7.3 )
Operating
loss $ (419.2 ) $
(456.5 ) (8.2 )%
Two Quarters
Ended
Net revenues: Company-operated stores $ 37.7 $ 86.7 (56.5 )%
Licensed stores — 1.2 nm Other 27.6 24.1 14.5
Total net revenues 65.3 112.0 (41.7
) Cost of sales including occupancy costs 77.7 91.8 (15.4 )
Store operating expenses 40.4 43.7 (7.6 ) Other operating expenses
7.5 10.5 (28.6 ) Depreciation and amortization expenses 87.9 80.3
9.5 General and administrative expenses 676.6 571.0 18.5
Restructuring and impairments 14.5 131.3 (89.0 )
Total operating expenses 904.6 928.6 (2.6 )
Operating loss $ (839.3 ) $
(816.6 ) 2.8 %
Corporate and Other primarily consists of our unallocated
corporate operating expenses, the results from Starbucks ReserveTM
Roastery & Tasting Rooms, Starbucks Reserve brand and products
and Princi operations, Evolution Fresh and formerly, the Teavana
retail business.
Supplemental
Information
The following supplemental information is provided for
historical and comparative purposes.
U.S. Supplemental
Data
Quarter Ended ($ in millions)
Mar 31, 2019 Apr 1, 2018
Change (%) Revenues $3,947.2
$3,657.9 8% Comparable Store Sales Growth (1) 4% 2% Change in
Transactions 0% 0% Change in Ticket 4% 3% Store Count
14,778 14,296 3% (1) Includes only
Starbucks® company-operated stores open 13 months or longer.
China
Supplemental Data
Quarter Ended
($ in millions)
Mar 31, 2019 Apr 1, 2018
Change (%) Revenues $702.8
$645.7 9% Comparable Store Sales Growth (1) 3% 4% Change in
Transactions (1)% 1% Change in Ticket 4% 3% Store Count
3,789 3,236 17% (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.
Store
Data
Net stores opened/(closed)
andtransferred during the period
Quarter
Ended Two Quarters Ended Stores open as of Mar
31,2019 Apr 1,2018 Mar
31,2019 Apr 1,2018 Mar
31,2019 Apr 1,2018 Americas:
Company-operated stores (1 ) (29 ) 83 83 9,767 9,496 Licensed
stores 67 216 173 382 7,943
7,528 Total Americas 66 187 256 465
17,710 17,024 China/Asia Pacific(1): Company-operated stores
133 134 324 1,746 5,483 4,816 Licensed stores 71 82
139 (1,230 ) 3,510 3,179 Total China/Asia Pacific 204
216 463 516 8,993 7,995 EMEA(2):
Company-operated stores (95 ) (7 ) (98 ) (6 ) 392 496 Licensed
stores 142 71 246 193 3,076
2,665 Total EMEA 47 64 148 187 3,468
3,161 Corporate and Other: Company-operated stores 2 (285 )
5 (286 ) 13 4 Licensed stores — (12 ) (12 ) (12 ) —
25 Total Corporate and Other 2 (297 ) (7 ) (298 ) 13
29
Total Company
319 170 860 870
30,184 28,209 (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 on
December 31, 2017. (2) EMEA store data includes the transfer of 82
company-operated retail stores in France and the Netherlands to
licensed stores in the second 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 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
margin, non-GAAP effective tax rate and non-GAAP EPS are general
and administrative expenses, operating income, operating margin,
effective tax rate 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. Sale of certain
retail operations Management excludes the gains and net loss
related to the sale of our France, Netherlands and Brazil retail
operations and associated transaction costs as these items do not
reflect future losses, expenses or tax impacts and for reasons
discussed above. Restructuring, impairment and optimization costs
Management excludes restructuring charges and business process
optimization costs related to strategic shifts in its Teavana,
EMEA, U.S., e-commerce 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 and Switzerland intangible asset
impairments. Management excludes these items for reasons discussed
above. 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. 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-related costs Management excludes the
transaction-related costs associated with Nestlé 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, the
impacts of estimated incremental foreign withholding taxes on
expected repatriated 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 G&A, non-GAAP operating income, 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 Mar 31, Apr 1,
Consolidated 2019 2018 Change General
and administrative expenses, as reported (GAAP) $ 475.6 $ 420.6
13.1% Restructuring, impairment and optimization costs (1) (1.4 ) —
CAP transaction and integration-related items (2) (10.5 ) (9.9 )
2018 U.S. stock award (3) (23.8 ) — Nestlé transaction-related
costs (0.6 ) — Sale of certain retail operations transaction costs
— (1.1 ) Sale of Tazo brand — (0.9 ) Non-GAAP G&A $
439.3 $ 408.7 7.5% Operating income, as
reported (GAAP) $ 857.7 $ 772.5 11.0% Restructuring, impairment and
optimization costs (1) 45.1 135.2 CAP transaction and
integration-related items (2) 68.2 66.9 2018 U.S. stock award (3)
23.8 — Nestlé transaction-related costs 4.3 — Sale of certain
retail operations transaction costs — 1.6 Sale of Tazo brand —
0.9 Non-GAAP operating income $ 999.1 $ 977.1
2.3% Operating margin, as reported (GAAP) 13.6 % 12.8
% 80 bps Restructuring, impairment and optimization costs (1) 0.7
2.2 CAP transaction and integration-related items (2) 1.1 1.1 2018
U.S. stock award (3) 0.4 — Nestlé transaction-related costs 0.1 —
Sale of certain retail operations transaction costs — — Sale of
Tazo brand — — Non-GAAP operating margin 15.8 % 16.2
% (40) bps Diluted net earnings per share, as reported
(GAAP) $ 0.53 $ 0.47 12.8% East China acquisition-related gain —
(0.03 ) Gain on sale of certain retail operations (0.02 ) —
Restructuring, impairment and optimization costs (1) 0.04 0.10 CAP
transaction and integration-related items (2) 0.05 0.05 2018 U.S.
stock award (3) 0.02 — Other tax matters (4) — 0.02 Income tax
effect on Non-GAAP adjustments (5) (0.02 ) (0.08 ) Non-GAAP EPS $
0.60 $ 0.53 13.2%
(1)
Represents costs associated with our restructuring
efforts, primarily severance, lease termination costs 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 and the divestiture of our Taiwan 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)
Represents the estimated impact of the U.S. Tax Cuts and Jobs Act,
specifically the transition tax on undistributed foreign earnings,
estimated incremental foreign withholding taxes on expected
repatriated earnings and the re-measurement of deferred taxes.
(5)
Adjustments were determined based on the nature of the underlying
items and their relevant jurisdictional tax rates.
($ in millions)
Year Ended Sep 30,
Consolidated
2018 General and administrative expenses, as reported (GAAP)
$ 1,759.0 Restructuring, impairment and optimization costs (10.0 )
CAP transaction and integration-related items (38.0 ) 2018 U.S.
stock award (45.8 ) Nestlé transaction-related costs (16.9 ) Sale
of certain retail operations transaction costs (1.1 ) Sale of Tazo
brand (2.2 ) Non-GAAP G&A $ 1,645.0
STARBUCKS CORPORATION NON-GAAP DISCLOSURE DETAILS
(unaudited, $ in millions)
Q2 QTD FY19 ($ in millions) Americas
China/AsiaPacific
EMEA Channel Dev
Corporate and Other Consolidated
P&L Line Item
Restructuring,Impairment
andOptimizationCosts
CAPTransaction
andIntegrationCosts
Restructuring,Impairment
andOptimizationCosts
NestléTransaction-Related
Costs
Restructuring,Impairment
andOptimizationCosts
CAPTransaction
andIntegrationCosts
NestléTransaction-Related
Costs
2018 U.S. StockAward
Restructuring,Impairment
&OptimizationCosts
Total
Non-GAAPAdjustment
Net revenue
Cost
of sales including occupancy costs Store operating expenses 3.7 0.1
3.8 Other operating expenses 0.2 0.1 3.7 0.3 4.3 Depreciation and
amortization expenses 54.0 54.0 General and administrative expenses
9.9 1.3 0.6 0.6 23.8 0.1 36.3 Restructuring and impairments 18.2
24.1 0.7 43.0 Income from equity investees
0.0 Total impact to
operating income $ (18.4 ) $ (67.6 ) $
(25.6 ) $ (3.7 ) $ (0.3 )
$ (0.6 ) $ (0.6 ) $ (23.8 )
$ (0.8 ) $ (141.4 ) Non-Operating gains
Gains resulting from divestiture of certain operations
$ (21.0 )
Year Ended Sep 29,
Consolidated
2019 (Projected) Diluted net earnings per share
(GAAP) $ 2.40 - 2.44 Restructuring, impairment and optimization
costs (1) 0.14 CAP transaction and integration-related items (2)
0.22 Sale of certain retail operations (0.02 ) 2018 U.S. stock
award (3) 0.04 Nestlé transaction related costs 0.01 Other tax
matters (4) 0.06 Income tax effect on Non-GAAP adjustments (5)
(0.10 ) Non-GAAP EPS $ 2.75 - 2.79 Effective tax rate (GAAP)
20% - 22% Income tax rate effect of Non-GAAP adjustments (6) (1 )
Non-GAAP effective tax rate 19% - 21%
(1)
Represents restructuring, impairment and business
optimization 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 incremental stock-based compensation award for U.S.
partners (employees).
(4)
Represents the estimated impact of the U.S. Tax Cuts and Jobs Act,
including the transition tax on undistributed foreign earnings,
estimated incremental foreign withholding taxes on expected
repatriated earnings and the re-measurement of deferred taxes.
(5)
Adjustments were determined based on the nature of the underlying
items and their relevant jurisdictional tax rates.
(6)
Represents the estimated income tax effect of all non-GAAP items.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190425005957/en/
Starbucks Contact, Investor Relations:Durga
Doraisamy206-318-7118investorrelations@starbucks.com
Starbucks Contact, Media:Reggie
Borges206-318-7100press@starbucks.com
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