Q2 Comp Store Sales Up 2% Globally and in the
U.S., Up 4% in China
Consolidated Net Revenues Up 14% to a Record
$6.0 Billion
GAAP EPS of $0.47; Non-GAAP EPS of $0.53, Up
18% Year-Over-Year
Active Starbucks RewardsTM Membership in the
U.S. Increases 12% Year-Over-Year to 14.9 Million
Company Reiterates Fiscal 2018 Outlook;
Announces Additional 100M Share Repurchase Authorization
Starbucks Corporation (NASDAQ: SBUX) today reported financial
results for its 13-week fiscal second quarter ended April 1,
2018. 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.
Q2 Fiscal 2018
Highlights
- Global comparable store sales increased
2%, driven by a 3% increase in average ticket
- Americas and U.S. comp store sales
increased 2%
- CAP comp store sales increased 3%
- China comp store sales increased
4%
- Consolidated net revenues of $6.0
billion, up 14% over the prior year including:
- 3% net benefit from consolidation of
the recently acquired East China business and other
streamline-driven activities, including Teavana mall store
closures, the Tazo divestiture, and the conversion of certain
international retail operations from company-owned to licensed
models
- 2% benefit from foreign currency
translation
- GAAP operating margin, inclusive of
restructuring and impairment charges, declined to 12.8%, down 490
basis points compared to the prior year
- Non-GAAP operating margin of 16.2%
declined 170 basis points compared to the prior year
- GAAP Earnings Per Share of $0.47, up 4%
over the prior year
- Non-GAAP EPS of $0.53, up 18% over the
prior year
- The Starbucks RewardsTM loyalty program
added 1.6 million active members in the U.S., up 12% over the prior
year
- Starbucks RewardsTM member spend
increased to 39% of U.S. company-operated sales; Mobile Order and
Pay represented 12% of U.S. company-operated transactions
- The company opened 468 net new
Starbucks stores in Q2 and now operates 28,209 stores across 76
markets. During the quarter, the company also closed 298 Teavana®
stores
- The company returned $2.0 billion to
shareholders in the quarter through a combination of dividends and
share repurchases
“Starbucks Q2 of fiscal 2018 represented another quarter of
record financial results, highlighted by accelerating momentum
across our Americas business - particularly in the U.S., continued
strong performance in China and our strongest comp growth in Japan
in five quarters,” said Kevin Johnson, president and ceo. “At the
same time we made measurable progress against each of the strategic
initiatives that position Starbucks to continue delivering
best-in-class operating and financial results long into the
future.”
“We have a clear set of actions underway to improve
profitability through a combination of comp and beverage growth and
savings across COGS, waste and labor as we move through the back
half of the year,” said Scott Maw, cfo. “We are continuing to
invest in our business - strategically and with a ‘long game’
mentality - while at the same time taking decisive near-term action
to maximize our brand portfolio and ensure that we continue to
deliver outsized returns to our shareholders in the quarters and
years ahead.”
Second Quarter
Fiscal 2018 Summary
Quarter Ended Apr 1, 2018 Comparable Store
Sales(1) Sales Growth Change in
Transactions Change in Ticket Consolidated 2%
(1)% 3% Americas 2% 0% 3% CAP 3% 0% 3% EMEA(2)
(1)% (4)% 3% (1) Includes only Starbucks
company-operated stores open 13 months or longer. Comparable store
sales exclude the effect of fluctuations in foreign currency
exchange rates. (2) Company-operated stores represent 16% of the
EMEA segment store portfolio as of April 1, 2018.
Operating Results Quarter
Ended Change ($ in millions, except per share amounts)
Apr 1, 2018 Apr 2, 2017 Net New
Stores (1) 170 427 (257) Revenues $6,031.8 $5,294.0 14%
Operating Income $772.5 $935.4 (17)% Operating Margin 12.8% 17.7%
(490) bps EPS $0.47 $0.45 4%
(1) Q2 2018 net new stores include the
closure of 298 Teavana-branded stores.
Consolidated net revenues grew 14% over Q2 FY17 to $6.0 billion
in Q2 FY18, primarily driven by incremental revenues from the
impact of our ownership change in East China, incremental revenues
from 2,103 net new Starbucks store openings over the past 12
months, and 2% growth in global comparable store sales.
Consolidated operating income declined 17% to $772.5 million in
Q2 FY18, down from $935.4 million in Q2 FY17. Consolidated
operating margin declined 490 basis points to 12.8%, primarily due
to restructuring and impairments, food-related mix shift primarily
in the Americas segment, higher investments in our store partners
(employees), and the impact of our ownership change in East
China.
Q2 Americas
Segment Results
Quarter Ended
Change ($ in millions)
Apr 1, 2018
Apr 2, 2017 Net New Stores 187 200 (13)
Revenues $4,003.5 $3,720.4 8% Operating Income $801.3 $826.1 (3)%
Operating Margin 20.0% 22.2% (220) bps
Net revenues for the Americas segment grew 8% over Q2 FY17 to
$4.0 billion in Q2 FY18, primarily driven by incremental revenues
from 966 net new store openings over the past 12 months and a 2%
growth in comparable store sales.
Operating income declined 3% to $801.3 million in Q2 FY18, down
from $826.1 million in Q2 FY17. Operating margin of 20.0% declined
220 basis points, primarily due to higher investments in our store
partners (employees) and food-related mix shift.
Q2 China/Asia
Pacific Segment Results
Quarter Ended
Change ($ in millions)
Apr 1, 2018
Apr 2, 2017 Net New Stores 216 187 29
Revenues $1,186.4 $768.9 54% Operating Income $204.6 $175.9 16%
Operating Margin 17.2% 22.9% (570) bps
Net revenues for the China/Asia Pacific segment grew 54% over Q2
FY17 to $1,186.4 million in Q2 FY18, primarily driven by
incremental revenues from the impact of our ownership change in
East China, incremental revenues from 759 net new store openings
over the past 12 months, favorable foreign currency translation,
and a 3% increase in comparable store sales. The increase was
partially offset by the absence of company-operated store revenue
related to the sale of our Singapore retail operations to a
licensed partner in Q4 FY17.
Q2 FY18 operating income of $204.6 million grew 16% over Q2 FY17
operating income of $175.9 million. Operating margin declined 570
basis points to 17.2%, primarily due to the impact of our ownership
change in East China.
Q2 EMEA Segment
Results
Quarter Ended
Change ($ in millions)
Apr 1, 2018
Apr 2, 2017 Net New Stores 64 46 18
Revenues $266.1 $231.7 15% Operating Income/(Loss) ($4.3) $27.7
(116)% Operating Margin (1.6)% 12.0% (1,360)
bps
Net revenues for the EMEA segment grew 15% over Q2 FY17 to
$266.1 million in Q2 FY18, primarily driven by favorable foreign
currency translation and incremental revenues from the opening of
385 net new licensed stores over the past 12 months. Partially
offsetting the increase was a decrease in comparable store
sales.
Operating loss of $4.3 million in Q2 FY18 declined 116% versus
operating income of $27.7 million in Q2 FY17. Operating margin
declined 1,360 basis points to (1.6)%, primarily driven by a
partial impairment of goodwill related to our Switzerland retail
business and sales deleverage on company-operated stores.
Q2 Channel
Development Segment Results
Quarter Ended
Change ($ in millions)
Apr 1, 2018
Apr 2, 2017 Revenues $500.2 $461.3 8%
Operating Income $215.3 $193.6 11% Operating Margin 43.0%
42.0% 100 bps
Net revenues for the Channel Development segment of $500.2
million in Q2 FY18 increased 8% versus the prior year quarter
primarily driven by higher sales of premium single-serve products
and lapping a prior year revenue deduction adjustment, partially
offset by the absence of revenue from the sale of our Tazo brand in
the first quarter of fiscal 2018.
Operating income of $215.3 million in Q2 FY18 grew 11% compared
to Q2 FY17. Operating margin expanded 100 basis points to 43.0%,
primarily driven by lapping a revenue deduction adjustment,
partially offset by lower income from our North American Coffee
Partnership joint venture.
Q2 All Other
Segments Results
Quarter Ended
Change ($ in millions)
Apr 1, 2018
Apr 2, 2017 Net New Stores (297) (6)
(291) Revenues $75.6 $111.7 (32)% Operating Loss $(114.8)
$(25.5) 350%
All Other Segments primarily includes Seattle’s Best Coffee®,
Starbucks ReserveTM Coffee and Roastery businesses, and
Teavana-branded stores. The operating loss in Q2 FY18 was primarily
due to restructuring costs related to our strategy to close Teavana
retail stores and focus on TeavanaTM tea within Starbucks
stores.
Year to Date
Financial Results
Two Quarters Ended
April 1, 2018 Comparable Store Sales(1)
Sales Growth Change in Transactions
Change in Ticket Consolidated 2% 0% 2%
Americas 2% 0% 2% CAP 2% 0% 2% EMEA(2) (1)% (4)%
3% (1) Includes only Starbucks company-operated stores open
13 months or longer. Comparable store sales exclude the effect of
fluctuations in foreign currency exchange rates. (2)
Company-operated stores represent 16% of the EMEA segment store
portfolio as of April 1, 2018.
Operating Results Two Quarters Ended
Change ($ in millions, except per share amounts)
Apr 1, 2018 Apr 2, 2017 Net New
Stores (1) 870 1,076 (206) Revenues $12,105.5 $11,027.0 10%
Operating Income $1,888.6 $2,068.3 (9)% Operating Margin 15.6%
18.8% (320) bps EPS $2.05 $0.96 114% (1)
Fiscal 2018 net new stores include the net closure of 300
Teavana-branded stores.
Fiscal 2018 Targets
The company reiterates the following full year FY18 targets but
notes that all guidance items exclude the yet to be determined
impact of its previously announced plan to close more than 8,000
company-owned stores in the U.S. on May 29, 2018 to conduct
racial-bias training for all partners (employees) in the U.S.
- Continue to expect approximately 2,300
net new Starbucks 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 when excluding approximately 2
points of net favorability from the East China acquisition and
other streamline-driven activities
- Continue to 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
Please refer to the reconciliation of GAAP measures to non-GAAP
measures at the end of this release.
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
- Starbucks announced it will close more
than 8,000 company-owned stores and its corporate offices in the
U.S. on May 29 to conduct racial-bias training for all
partners (employees) in the U.S. The training will be provided
to nearly 175,000 partners (employees) across the country and
will become part of the onboarding process for new partners. Once
complete, the company will make the education materials available
to other companies, including its licensees.
- The company hosted its 26th Annual
Meeting of Shareholders on March 21 in Seattle. The company
announced that Starbucks had reached 100 percent pay equity for
partners of all genders and races performing similar work across
the U.S.
- In partnership with Closed Loop
Partners and its Center for the Circular Economy, Starbucks
committed $10 million in March to establish a groundbreaking
consortium launching the NextGen Cup Challenge. Through the NextGen
Cup Challenge, the consortium will award accelerator grants to
promote the development of more sustainable cup solutions and
invite industry participation and partnership on the way to
identifying a global solution.
- The company announced that it had
entered into an agreement with SouthRock Capital Ltda – a leading
multi-brand restaurant operator in Brazil – to fully license
Starbucks retail operations in Brazil. The agreement provides
SouthRock the rights to develop and operate Starbucks stores across
the country. With the transition of ownership in Brazil,
Starbucks retail operations across all markets in Latin America and
the Caribbean became wholly licensed.
- In March Starbucks opened the doors to
its 46,000-square foot Hacienda Alsacia Visitor Center, located on
the grounds of its Costa Rican coffee farm.
- The company opened its Starbucks
ReserveTM Coffee SODO store in Seattle on February 27, inviting
visitors to take a journey of discovery with
small-lot Starbucks ReserveTM coffees and PrinciTM food.
This location is the first of the company’s new Starbucks
Reserve store concept, introducing a marketplace-style environment
to showcase its premium Starbucks Reserve brand.
- In February, Starbucks and Chase
announced the availability of the Starbucks RewardsTM Visa® Card, a
co-brand credit card integrated directly into the Starbucks
RewardsTM loyalty program. The new credit card is an expansion of
the ongoing relationship between the two companies. Chase Merchant
Services is the payment processing partner for Starbucks stores in
the U.S. and Canada, and Chase Pay is accepted at participating
Starbucks stores in the U.S., as well as through the Starbucks
mobile app.
- For the 12th consecutive year,
Starbucks was named one of the World’s Most Ethical Companies by
the Ethisphere Institute in February. Separately, Starbucks was
named the fifth most admired company in the world
by Fortune magazine in January. This is the 16th year in a row
that Starbucks has appeared on Fortune’s global list.
- The company closed an underwritten
public offering of $1 billion of 3.100% senior notes due 2023 and
$600 million of 3.500% senior notes due 2028. The company plans to
use the net proceeds for general corporate purposes, including the
repurchase of Starbucks common stock under the company’s ongoing
share repurchase program, business expansion, payment of cash
dividends on Starbucks common stock, or the financing of possible
acquisitions.
- The company repurchased 27.4 million
shares of common stock in Q2 FY18; the company's Board of Directors
has authorized an additional 100 million shares for repurchase
under its ongoing share repurchase program. With the
additional 100 million shares, the company now has approximately
124 million shares available for purchase under current
authorizations.
- The Board of Directors declared a cash
dividend of $0.30 per share, payable on May 25, 2018, to
shareholders of record as of May 10, 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, Roz
Brewer, group president and coo, 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,
May 26, 2018.
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, accelerating momentum, and potential of
our business, operations, and brand, the impact of our food,
beverage and digital innovation, operational improvements, actions
to improve profitability and timing, including through a
combination of comp and beverage growth and savings across COGS,
waste and labor, our 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 and tax rates, our
fiscal 2018 and long-term financial targets, and our strategic,
operational, and digital initiatives, including the East China
acquisition, 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 CORPORATION CONSOLIDATED STATEMENTS OF
EARNINGS
(unaudited, in millions, except per share
data)
Quarter Ended Quarter Ended Apr
1, 2018 Apr 2, 2017
%Change
Apr 1, 2018 Apr 2, 2017
As a % of total net revenues Net revenues:
Company-operated stores $ 4,828.0 $ 4,195.4 15.1 % 80.0 % 79.2 %
Licensed stores 625.6 546.7 14.4 10.4 10.3 CPG, foodservice and
other (1) 578.2 551.9 4.8 9.6 10.4
Total net revenues 6,031.8 5,294.0 13.9
100.0 100.0 Cost of sales including occupancy costs
(2) 2,516.0 2,141.2 17.5 41.7 40.4 Store operating expenses 1,789.6
1,586.4 12.8 29.7 30.0 Other operating expenses (3) 134.3 134.7
(0.3 ) 2.2 2.5 Depreciation and amortization expenses 331.6 253.6
30.8 5.5 4.8 General and administrative expenses 405.8 326.8 24.2
6.7 6.2 Restructuring and impairments (4) 134.7 — nm
2.2 — Total operating expenses 5,312.0 4,442.7 19.6
88.1 83.9 Income from equity investees 52.7 84.1
(37.3 ) 0.9 1.6
Operating income 772.5
935.4 (17.4 ) 12.8 17.7 Gain
resulting from acquisition of joint venture (5) 47.6 — nm 0.8 —
Gain/(loss) resulting from divestiture of certain operations (6)
(4.9 ) 9.6 nm (0.1 ) 0.2 Interest income and other, net 35.5 58.3
(39.1 ) 0.6 1.1 Interest expense (35.1 ) (22.9 ) 53.3 (0.6 ) (0.4 )
Earnings before income taxes 815.6 980.4 (16.8 ) 13.5 18.5 Income
tax expense 155.8 327.6 (52.4 ) 2.6 6.2
Net earnings including noncontrolling interests 659.8 652.8 1.1
10.9 12.3
Net loss attributable to noncontrolling
interests
(0.3 ) — nm — —
Net earnings attributable
to Starbucks $ 660.1 $ 652.8
1.1 10.9 % 12.3 % Net
earnings per common share - diluted $ 0.47
$ 0.45 4.4 % Weighted avg.
shares outstanding - diluted 1,406.6 1,464.8 Cash dividends
declared per share $ 0.30 $ 0.25
Supplemental Ratios: Store
operating expenses as a % of company-operated store revenues 37.1 %
37.8 % Other operating expenses as a % of non-company-operated
store revenues 11.2 % 12.3 % Effective tax rate including
noncontrolling interests 19.1 % 33.4 % (1)
CPG revenues in Q2 FY17 included an
unfavorable revenue deduction adjustment pertaining to prior
periods of $20.6 million.
(2)
Reduced inventory write-offs of $2.3
million related to our restructuring efforts was recorded in cost
of sales including occupancy costs.
(3)
Includes $2.8 million of business process
optimization costs, primarily consulting fees.
(4)
Represents $106.2 million associated with
our restructuring efforts, primarily lease termination costs and
$28.5 million of Switzerland goodwill impairment.
(5)
Represents a gain adjustment related to
finalizing the acquisition of our East China joint venture.
(6)
Primarily includes the loss on the sale of
our Brazil retail operations of $8.5 million and a gain adjustment
related to finalizing the sale of our Taiwan joint venture of $3.6
million.
(7)
Included in interest income and other, net
is the gain on the sale of our investment in Square, Inc. warrants
of $40.5 million in Q2 FY17.
Two Quarters Ended Two Quarters Ended
Apr 1, 2018 Apr 2, 2017
%Change
Apr 1, 2018 Apr 2, 2017
As a % of totalnet revenues Net revenues:
Company-operated stores $ 9,569.8 $ 8,664.7 10.4 % 79.1 %
78.6 % Licensed stores 1,308.0 1,149.1 13.8 10.8 10.4 CPG,
foodservice and other (1) 1,227.7 1,213.2 1.2 10.1
11.0
Total net revenues 12,105.5
11,027.0 9.8 100.0 100.0 Cost of sales
including occupancy costs (2) 5,018.9 4,436.2 13.1 41.5 40.2 Store
operating expenses 3,526.5 3,224.6 9.4 29.1 29.2 Other operating
expenses (3) 276.0 280.1 (1.5 ) 2.3 2.5 Depreciation and
amortization expenses 590.4 503.3 17.3 4.9 4.6 General and
administrative expenses 784.9 683.1 14.9 6.5 6.2 Restructuring and
impairments (4) 162.3 — nm 1.3 — Total
operating expenses 10,359.0 9,127.3 13.5 85.6 82.8 Income from
equity investees 142.1 168.6 (15.7 ) 1.2 1.5
Operating income
1,888.6 2,068.3 (8.7 ) 15.6
18.8 Gain resulting from acquisition of joint venture (5)
1,373.9 — nm 11.3 — Gain/(loss) resulting from divestiture of
certain operations (6) 496.3 9.6 nm 4.1 0.1 Interest income and
other, net (7) 123.7 82.4 50.1 1.0 0.7 Interest expense (61.0 )
(46.7 ) 30.6 (0.5 ) (0.4 ) Earnings before income taxes 3,821.5
2,113.6 80.8 31.6 19.2 Income tax expense 911.6 709.0
28.6 7.5 6.4 Net earnings including noncontrolling
interests 2,909.9 1,404.6 107.2 24.0 12.7
Net loss attributable to noncontrolling
interests
(0.4 ) (0.3 ) 33.3 — —
Net earnings attributable
to Starbucks $ 2,910.3 $
1,404.9 107.2 24.0 % 12.7
% Net earnings per common share - diluted
$ 2.05 $ 0.96
113.5 % Weighted avg. shares outstanding - diluted
1,420.5 1,467.7 Cash dividends declared per share $ 0.60 $
0.50
Supplemental Ratios: Store operating expenses as
a % of company-operated store revenues 36.9 % 37.2 % Other
operating expenses as a % of non-company-operated store revenues
10.9 % 11.9 % Effective tax rate including noncontrolling interests
23.9 % 33.5 % (1) CPG revenues in Q2 FY17 included an
unfavorable revenue deduction adjustment pertaining to prior
periods of $13.2 million. (2) As a result of our restructuring
efforts, $2.1 million was recorded in cost of sales including
occupancy costs related to inventory write-offs. (3) Includes $2.8
million of business process optimization costs, primarily
consulting fees. (4) Primarily includes restructuring expenses of
$131.3 million associated with our Teavana-branded stores, $2.5
million related to our Starbucks North American retail businesses
and $28.5 million of Switzerland goodwill impairment. (5)
Represents the gain resulting from the acquisition of our East
China joint venture. (6) Primarily includes the gains on the sales
of our Tazo brand and Taiwan joint venture for $347.9 million and
$156.6 million, respectively. (7) Included in interest income and
other, net is the gain on the sale of our investment in Square,
Inc. warrants of $40.5 million in Q2 FY17.
Segment Results
(in millions)
Americas
Apr
1, 2018 Apr 2, 2017
%Change
Apr 1, 2018 Apr 2, 2017
Quarter
Ended
As a % of Americas
total net revenues
Net revenues: Company-operated stores $ 3,564.8 $ 3,334.9 6.9 %
89.0 % 89.6 % Licensed stores 429.3 376.7 14.0 10.7 10.1
Foodservice and other 9.4 8.8 6.8 0.2 0.2
Total net revenues 4,003.5 3,720.4
7.6 100.0 100.0 Cost of sales including
occupancy costs 1,534.4 1,354.9 13.2 38.3 36.4 Store operating
expenses 1,411.8 1,299.1 8.7 35.3 34.9 Other operating expenses
34.7 31.5 10.2 0.9 0.8 Depreciation and amortization expenses 160.4
155.4 3.2 4.0 4.2 General and administrative expenses 60.0 53.4
12.4 1.5 1.4 Restructuring expenses (1) 0.9 — nm —
— Total operating expenses 3,202.2 2,894.3
10.6 80.0 77.8
Operating income
$ 801.3 $ 826.1
(3.0 )% 20.0 % 22.2 %
Supplemental Ratios: Store operating expenses as a % of
company-operated store revenues 39.6 % 39.0 % Other operating
expenses as a % of non-company-operated store revenues 7.9 % 8.2 %
Two Quarters
Ended
Net revenues: Company-operated stores $ 7,351.8 $ 6,895.9 6.6 %
88.9 % 89.4 % Licensed stores 896.0 798.0 12.3 10.8 10.3
Foodservice and other 21.5 17.9 20.1 0.3 0.2
Total net revenues 8,269.3 7,711.8
7.2 100.0 100.0 Cost of sales including
occupancy costs 3,138.2 2,795.2 12.3 38.0 36.2 Store operating
expenses 2,845.3 2,655.5 7.1 34.4 34.4 Other operating expenses
72.2 63.4 13.9 0.9 0.8 Depreciation and amortization expenses 318.4
307.8 3.4 3.9 4.0 General and administrative expenses 112.1 105.3
6.5 1.4 1.4 Restructuring expenses (1) 2.5 — nm —
— Total operating expenses 6,488.7 5,927.2
9.5 78.5 76.9
Operating income $
1,780.6 $ 1,784.6 (0.2
)% 21.5 % 23.1 % Supplemental
Ratios: Store operating expenses as a % of company-operated
store revenues 38.7 % 38.5 % Other operating expenses as a % of
non-company-operated store revenues 7.9 % 7.8 % (1)
Represents restructuring expenses of $0.9 million and $2.5 million
for the quarter and two quarters ended April 1, 2018, respectively,
related to our Starbucks North American retail business.
China/Asia Pacific (CAP)
Apr 1, 2018 Apr 2, 2017
%Change
Apr 1, 2018 Apr 2, 2017
Quarter
Ended
As a % of CAP
total net revenues
Net revenues: Company-operated stores $ 1,098.6 $ 687.8 59.7
% 92.6 % 89.5 % Licensed stores 84.3 78.4 7.5 7.1 10.2 Foodservice
and other 3.5 2.7 29.6 0.3 0.4
Total
net revenues 1,186.4 768.9 54.3
100.0 100.0 Cost of sales including occupancy costs
510.6 333.5 53.1 43.0 43.4 Store operating expenses 306.5 202.5
51.4 25.8 26.3 Other operating expenses 18.6 17.6 5.7 1.6 2.3
Depreciation and amortization expenses 121.6 49.3 146.7 10.2 6.4
General and administrative expenses 41.2 34.2 20.5
3.5 4.4 Total operating expenses 998.5 637.1 56.7
84.2 82.9 Income from equity investees 16.7 44.1
(62.1 ) 1.4 5.7
Operating income $
204.6 $ 175.9 16.3
% 17.2 % 22.9 % Supplemental
Ratios: Store operating expenses as a % of company-operated
store revenues 27.9 % 29.4 % Other operating expenses as a % of
non-company-operated store revenues 21.2 % 21.7 %
Two Quarters
Ended
Net revenues: Company-operated stores $ 1,841.1 $ 1,379.2 33.5 %
90.7 % 89.6 % Licensed stores 182.6 156.4 16.8 9.0 10.2 Foodservice
and other 6.3 4.0 57.5 0.3 0.3
Total
net revenues 2,030.0 1,539.6 31.9
100.0 100.0 Cost of sales including occupancy costs
882.3 670.8 31.5 43.5 43.6 Store operating expenses 525.1 406.8
29.1 25.9 26.4 Other operating expenses 39.8 36.7 8.4 2.0 2.4
Depreciation and amortization expenses 175.3 98.0 78.9 8.6 6.4
General and administrative expenses 73.6 74.8 (1.6 )
3.6 4.9 Total operating expenses 1,696.1 1,287.1 31.8
83.6 83.6 Income from equity investees 67.5 86.6
(22.1 ) 3.3 5.6
Operating income $
401.4 $ 339.1 18.4
% 19.8 % 22.0 % Supplemental
Ratios: Store operating expenses as a % of company-operated
store revenues 28.5 % 29.5 % Other operating expenses as a % of
non-company-operated store revenues 21.1 % 22.9 %
EMEA
Apr 1, 2018 Apr 2, 2017
%Change
Apr 1, 2018 Apr 2, 2017
Quarter
Ended
As a % of EMEA
total net revenues
Net revenues: Company-operated stores $ 138.7 $ 127.5 8.8 %
52.1 % 55.0 % Licensed stores 112.0 90.9 23.2 42.1 39.2 Foodservice
15.4 13.3 15.8 5.8 5.7
Total net
revenues 266.1 231.7 14.8 100.0
100.0 Cost of sales including occupancy costs 145.1 122.6
18.4 54.5 52.9 Store operating expenses 57.7 50.3 14.7 21.7 21.7
Other operating expenses (1) 20.0 14.1 41.8 7.5 6.1 Depreciation
and amortization expenses 8.1 7.6 6.6 3.0 3.3 General and
administrative expenses 11.0 9.4 17.0 4.1 4.1 Restructuring and
impairments (2) 28.5 — nm 10.7 — Total
operating expenses 270.4 204.0 32.5 101.6 88.0
Operating income/(loss)
$ (4.3 ) $ 27.7
(115.5 )% (1.6 )% 12.0 %
Supplemental Ratios: Store operating expenses as a % of
company-operated store revenues 41.6 % 39.5 % Other operating
expenses as a % of non-company-operated store revenues 15.7 % 13.5
%
Two Quarters
Ended
Net revenues: Company-operated stores $ 290.2 $ 273.4 6.1 % 52.8 %
55.4 % Licensed stores 228.2 193.0 18.2 41.5 39.1 Foodservice 31.5
27.5 14.5 5.7 5.6
Total net
revenues 549.9 493.9 11.3 100.0
100.0 Cost of sales including occupancy costs 297.2 258.7
14.9 54.0 52.4 Store operating expenses 112.4 97.1 15.8 20.4 19.7
Other operating expenses (1) 36.3 30.2 20.2 6.6 6.1 Depreciation
and amortization expenses 15.8 15.2 3.9 2.9 3.1 General and
administrative expenses 25.0 21.1 18.5 4.5 4.3 Restructuring and
impairments (2) 28.5 — nm 5.2 — Total
operating expenses 515.2 422.3 22.0 93.7 85.5
Operating income $ 34.7 $
71.6 (51.5 )% 6.3 %
14.5 % Supplemental Ratios: Store operating
expenses as a % of company-operated store revenues 38.7 % 35.5 %
Other operating expenses as a % of non-company-operated store
revenues 14.0 % 13.7 % (1)
Includes $2.8 million of business process
optimization costs, primarily consulting fees.
(2)
Represents goodwill impairment of $28.5
million related to our Switzerland retail business.
Channel Development
Apr 1, 2018 Apr 2, 2017
%Change
Apr 1, 2018 Apr 2, 2017
Quarter
Ended
As a % ofChannel Development total
net revenues Net revenues: CPG (1) $ 379.9 $ 346.3 9.7 %
75.9 % 75.1 % Foodservice 120.3 115.0 4.6 24.1
24.9
Total net revenues 500.2 461.3
8.4 100.0 100.0 Cost of sales 268.0 254.5 5.3
53.6 55.2 Other operating expenses 49.4 50.5 (2.2 ) 9.9 10.9
Depreciation and amortization expenses 0.2 0.6 (66.7 ) — 0.1
General and administrative expenses 3.3 2.1 57.1 0.7
0.5 Total operating expenses 320.9 307.7 4.3 64.2
66.7 Income from equity investees 36.0 40.0 (10.0 )
7.2 8.7
Operating income $ 215.3
$ 193.6 11.2 %
43.0 % 42.0 %
Two Quarters
Ended
Net revenues: CPG (1) $ 815.6 $ 783.3 4.1 % 76.9 % 77.2 %
Foodservice 244.8 231.6 5.7 23.1 22.8
Total net revenues 1,060.4 1,014.9 4.5
100.0 100.0 Cost of sales 564.3 543.0 3.9 53.2 53.5
Other operating expenses 104.9 110.9 (5.4 ) 9.9 10.9 Depreciation
and amortization expenses 0.7 1.2 (41.7 ) 0.1 0.1 General and
administrative expenses 6.7 5.4 24.1 0.6 0.5
Total operating expenses 676.6 660.5 2.4 63.8 65.1 Income
from equity investees 74.6 82.0 (9.0 ) 7.0 8.1
Operating income $ 458.4
$ 436.4 5.0 % 43.2
% 43.0 % (1)
CPG revenues included an unfavorable
revenue deduction adjustment pertaining to periods prior to the Q2
FY17 and YTD FY17 of $20.6 million and $13.2 million, respectively,
as recorded in Q2 FY17.
All Other Segments
Apr 1,
2018 Apr 2, 2017
%Change
Quarter
Ended
Net revenues: Company-operated stores $ 25.9 $
45.2 (42.7 )% Licensed stores — 0.7 nm CPG, foodservice and other
49.7 65.8 (24.5 )
Total net revenues
75.6 111.7 (32.3 ) Cost of sales
including occupancy costs (1) 57.8 74.1 (22.0 ) Store operating
expenses 13.6 34.5 (60.6 ) Other operating expenses 10.7 20.7 (48.3
) Depreciation and amortization expenses 1.0 3.5 (71.4 ) General
and administrative expenses 2.0 4.4 (54.5 ) Restructuring expenses
(2) 105.3 — nm Total operating expenses 190.4
137.2 38.8
Operating loss
$ (114.8 ) $ (25.5 )
350.2
Two Quarters
Ended
Net revenues: Company-operated stores $ 86.7 $ 116.2 (25.4 )%
Licensed stores 1.2 1.7 (29.4 ) CPG, foodservice and other 108.0
148.9 (27.5 )
Total net revenues 195.9
266.8 (26.6 ) Cost of sales including
occupancy costs (1) 137.0 164.5 (16.7 ) Store operating expenses
43.7 65.2 (33.0 ) Other operating expenses 22.1 38.2 (42.1 )
Depreciation and amortization expenses 1.7 6.3 (73.0 ) General and
administrative expenses 4.7 8.0 (41.3 ) Restructuring expenses (2)
131.3 — nm Total operating expenses 340.5
282.2 20.7
Operating loss $ (144.6
) $ (15.4 ) 839.0 % (1)
As a result of our restructuring efforts, ($2.3) million and
$2.1 million for the quarter and two quarters ended April 1, 2018,
respectively, was recorded in cost of sales including occupancy
costs related to inventory write-offs. (2) Primarily includes
restructuring expenses of $105.3 million and $131.3 million for the
quarter and two quarters ended April 1, 2018, respectively,
associated with our Teavana-branded stores.
Supplemental
Information
The following supplemental information is provided for
historical and comparative purposes.
U.S. Supplemental
Data
Quarter Ended ($ in millions)
Apr 1, 2018 Apr 2, 2017 Change
Revenues $3,656.2 $3,417.0 7% Comparable Store Sales
Growth(1) 2% 3% Change in Transactions 0% (2%) Change in Ticket 3%
4% (1) Includes only Starbucks
company-operated stores open 13 months or longer.
Store
Data
Net stores opened/(closed) and transferred during the
period Quarter Ended
Two Quarters Ended Stores open as of Apr 1,
2018 Apr 2, 2017 Apr 1,
2018 Apr 2, 2017 Apr 1,
2018 Apr 2, 2017 Americas:
Company-operated stores (29 ) 82 83 157 9,496 9,176 Licensed stores
216 118 382 294 7,528 6,882
Total Americas 187 200 465 451 17,024
16,058 China/Asia Pacific(1): Company-operated stores 134 67
1,746 171 4,816 2,982 Licensed stores 82 120 (1,230 )
319 3,179 3,951 Total China/Asia Pacific 216
187 516 490 7,995 6,933 EMEA:
Company-operated stores (7 ) — (6 ) (18 ) 496 505 Licensed stores
71 46 193 159 2,665 2,278 Total
EMEA 64 46 187 141 3,161 2,783
All Other Segments(2): Company-operated stores (285 ) (7 ) (286 )
(9 ) 4 349 Licensed stores (12 ) 1 (12 ) 3 25
38 Total All Other Segments (297 ) (6 ) (298 ) (6 ) 29 387
Total Company
170 427 870 1,076
28,209 26,161
(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 April 1, 2018, All
Other Segments included 25 licensed Teavana-branded stores.
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. Sale of Brazil retail operations Management
excludes the net loss related to the sale of our Brazil retail
operations and associated transaction costs as these items do not
reflect future losses, expenses or tax impacts 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, 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 goodwill impairment.
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. 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 CORPORATION RECONCILIATION OF SELECTED GAAP
MEASURES TO NON-GAAP MEASURES
(unaudited)
($ in millions)
Quarter Ended
Consolidated
Apr 1, 2018 Apr 2, 2017
Change Operating income, as reported (GAAP) $ 772.5 $ 935.4
(17.4)% Restructuring, impairment and optimization costs (1) 135.2
— CAP transaction and integration-related items (2) 66.9 13.8 Sale
of Brazil retail operations transaction costs 1.6 — Sale of Tazo
brand transaction costs 0.9 — Non-GAAP operating
income $ 977.1 $ 949.2 2.9% Operating margin,
as reported (GAAP) 12.8 % 17.7 % (490) bps Restructuring,
impairment and optimization costs (1) 2.2 — CAP transaction and
integration-related items (2) 1.1 0.3
Sale of Brazil retail operations
transaction costs
—
—
Sale of Tazo brand — — Non-GAAP operating margin 16.2
% 17.9 % (170) bps Diluted net earnings per share, as
reported (GAAP) $ 0.47 $ 0.45 4.4% East China acquisition gain
(0.03 ) — Sale of Taiwan joint venture operations — — Sale of Tazo
brand, net of transaction costs — — Restructuring, impairment and
optimization costs (1) 0.10 — CAP transaction and
integration-related items (2) 0.05 0.01 Sale of Germany retail
operations (3) — (0.01 ) Loss on sale of Brazil retail operations,
net of transaction costs — — Other tax matters (4) 0.02 — Income
tax effect on Non-GAAP adjustments (5) (0.08 ) — Non-GAAP
net earnings per share $ 0.53 $ 0.45 17.8% (1)
Represents $106.2 million associated with our restructuring
efforts, primarily lease termination costs, $28.5 million of
Switzerland goodwill impairment and $2.8 million of business
process optimization costs, primarily consulting fees. These were
partially offset by $2.3 million of reduced inventory write-offs
related to these efforts, which 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 East China and
Starbucks Japan; and the related post-acquisition integration
costs, such as incremental information technology and
compensation-related costs. (3) Represents a Q2 FY17 adjustment
associated with estimated indemnifications related to the sale of
our Germany retail operations, which occurred in FY16. (4)
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. (5) 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 (0.98 ) — Sale of Taiwan joint venture operations
(0.11 ) — Sale of Tazo brand (0.25 ) — Restructuring, impairment
and optimization costs (1) 0.14 0.11 CAP transaction and
integration-related items (2) 0.18 0.04
Sale of Brazil retail operations
0.01
—
Sale of Singapore retail operations — (0.06 ) Sale of Germany
retail operations — (0.01 ) The Starbucks Foundation donation —
0.03 Other tax matters (3) 0.13
—
2018 U.S. stock award (4) 0.03 — 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, impairment and business optimization
costs and inventory write-offs related to these efforts 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: https://www.businesswire.com/news/home/20180426006721/en/
Starbucks Contact, Investor Relations:Tom Shaw,
206-318-7118investorrelations@starbucks.comorStarbucks Contact,
Media:Reggie Borges, 206-318-7100press@starbucks.com
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