Starbucks Reports Record First Quarter Fiscal 2013 Results
Strong Comparable Store Sales Growth of 7% in US and Americas and 6% Globally Robust Holiday Contributes to an 11% Increase in Revenues to a Record $3.8 Billion EPS Rises 14% to a Record $0.57 Company Reaffirms FY13 Growth Targets
SEATTLE, January 24, 2013 - Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its 13-week fiscal first quarter ended December 30, 2012. Fiscal First Quarter 2013 Highlights: “Starbucks strong performance in Q1 demonstrates the strength, and unique resilience, of our increasingly global business, and the power and growing relevance of the Starbucks brand to consumers and communities all around the world,” said Howard Schultz, chairman, president and chief executive officer, Starbucks Coffee Company. “Solid growth in our U.S. retail business, further expansion of our Channel Development initiatives and continued successful execution against our expansion plans throughout China and Asia Pacific all contributed to the record results we announced today. Starbucks has never been better positioned to achieve the goals we have set for ourselves around the world and I have never been more optimistic about our future.” “Record earnings in the first quarter continued our strong momentum, reflecting the underlying strength in our core business,” commented Troy Alstead, chief financial officer. “We delivered excellent holiday results with 6% global comps, marking the 12th consecutive quarter of comps in excess of 5%. Our first quarter results demonstrate both efficiency, with record US productivity, and innovation, with the successful launch of Verismo, our newest growth platform.” Added Alstead, “Despite significant and unexpected cost pressures in the quarter, we achieved our earnings growth target and delivered record EPS. Starbucks strong Q1 performance reaffirms our confidence in the aggressive FY13 growth targets we announced in early November. The quality and diversity of growth drivers in the business, combined with our continued focus on operational excellence, gives us confidence in sustainable, strong profitable growth.” First Quarter Fiscal 2013 Summary Consolidated net revenues reached a record $3.8 billion in Q1 FY13, an increase of 11% over Q1 FY12. The increase was primarily due to a 6% increase in global comparable store sales, and incremental revenues from 401 net new company-operated store openings over the past 12 months. The 6% increase in comparable store sales was comprised of a 4% increase in the number of transactions and a 2% increase in average ticket. Also contributing to consolidated net revenue growth was 13% revenue growth in Channel Development and 14% revenue growth in licensed stores. Consolidated operating income increased 13% to a record $630.6 million, compared to $556.0 million for the same period a year ago. Operating margin expanded 40 basis points to 16.6% this quarter, compared to 16.2% in the same period last year. The margin increase was primarily due to increased sales leverage. Segment Reporting Update At the beginning of the first quarter of FY13, the company decentralized certain leadership functions in the areas of retail marketing and category management, global store development and partner resources, to support and align with the respective operating segment presidents. In conjunction with these moves, certain general and administrative and depreciation and amortization expenses associated with these functions, which were previously reported as unallocated corporate expenses within Other, are now reported within the respective operating segments to align with the regions that they support. In order to conform prior period classifications with the new alignment, the historical consolidated financial statements have been recast as reflected in the segment results below. This change did not impact historical consolidated results. Q1 Americas Segment Results Net revenues for the Americas segment were $2.8 billion in Q1 FY13, an increase of 10% over Q1 FY12. The increase was primarily due to a 7% increase in comparable store sales, comprised of a 4% increase in the number of transactions and a 2% increase in average ticket. Also contributing to the net revenue increase was incremental revenues from 253 net new company-operated store openings over the past 12 months and 11% revenue growth in licensed stores. Operating income increased to $590.3 million in Q1 FY13, growth of 8% compared to $548.9 million for the same period a year ago. Operating margin decreased 50 basis points to 20.8% in Q1 FY13. The margin contraction was driven by expenses related to the company's October global leadership conference, litigation charges and the impact from Superstorm Sandy. These expenses negatively impacted Q1 FY13 operating income and operating margin by $53 million and 190 basis points, respectively, compared to the same period in the prior year. Partially offsetting those expenses was increased sales leverage. Q1 EMEA Segment Results Net revenues for the EMEA segment were $306.1 million in Q1 FY13, an increase of 1% over Q1 FY12. The increase was driven by 41% revenue growth in licensed stores which was nearly offset by a decline in company-operated revenue as a result of recent store portfolio optimization activities including the sale of the Ireland store portfolio and UK airport locations to licensed partners as well as the closure of underperforming stores in the UK. Operating income of $22.3 million in Q1 FY13 grew 18% compared to $18.9 million for the same period a year ago. Operating margin increased 110 basis points to 7.3% compared to 6.2% in the prior-year period. Margin expansion was primarily driven by a continued focus on cost management and leverage from strong licensed store revenue growth. Q1 China/Asia Pacific Segment Results Net revenues for the China/Asia Pacific segment were $214.1 million in Q1 FY13, an increase of 28% over Q1 FY12. The increase was primarily due to incremental revenues from 166 net new company-operated store openings over the past 12 months and an 11% increase in comparable store sales. Additionally, licensed store revenue growth of 14% contributed to the revenue growth for the region. Operating income increased 26% to $72.1 million in Q1 FY13, compared to $57.3 million for the same period a year ago. Operating margin decreased 60 basis points to 33.7% in Q1 FY13 compared to 34.3% in the prior-year period. The margin contraction was primarily due to investment spending to support continued growth in China and a shift in the composition of our store portfolio from licensed to company-operated stores. The margin contraction was partially offset by lower performance-based compensation compared to the same period in the prior year when the region significantly outperformed its operating plan. Q1 Channel Development Segment Results Channel Development net revenues were $379.8 million in Q1 FY13, an increase of 13% over Q1 FY12, primarily driven by sales of Starbucks- and Tazo-branded K-Cup® packs. Also contributing to the revenue growth were incremental sales related to the launch of the Verismo system. Channel Development operating income grew 24% to $96.8 million in Q1 FY13 compared to $77.9 million for the same period a year ago. Operating margin increased 230 basis points to 25.5% in Q1 FY13 compared to 23.2% in the prior-year period. The margin expansion was mainly due to lower coffee-related costs, partially offset by Verismo launch costs. Fiscal 2013 Targets Starbucks reaffirms its fiscal 2013 targets as follows: Company Updates Conference Call Starbucks will be holding a conference call today at 2:00 p.m. Pacific Time, which will be hosted by Howard Schultz, chairman, president and ceo, Jeff Hansberry, president, Channel Development and Emerging Brands and Troy Alstead, cfo. The call will be broadcast live over the Internet and can be accessed at the company’s web site address of http://investor.starbucks.com. A replay of the call will be available via telephone through 9:00 p.m. Pacific Time on Friday, January 25, 2013 by calling 1-855-859-2056, reservation number 36843944. A replay of the webcast will also be available via the Investor Relations page on Starbucks.com through approximately 5:00 p.m. Pacific Time on Friday, February 22, 2013 at the following URL: http://investor.starbucks.com. The company’s consolidated statements of earnings, operating segment results, and other additional information have been provided on the following pages in accordance with current year classifications. This information should be reviewed in conjunction with this press release. Please refer to the company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2012 for additional information. About Starbucks Since 1971, Starbucks Coffee Company has been committed to ethically sourcing and roasting the highest quality arabica coffee in the world. 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 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, earnings per share, revenues, shareholder value, operational improvements and efficiencies, diversified business model, changes to organizational structures, business momentum, growth and growth opportunities overall and of specific businesses, markets and channels, sales leverage, store traffic, average ticket, overall performance of new and existing stores, loyalty programs, operating margins, profits, capital expenditures, operating costs, charges, comparable store sales, store openings and closings, the strength, health and potential of our business and brand, product innovations, store experience, tax rate and commodity costs and their impact. 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, coffee, dairy and other raw material prices and availability, costs associated with, and the successful execution of, the company's initiatives, strategies and plans, the acceptance of the company's products by our customers, fluctuations in U.S. and international economies and currencies, the impact of competition, the effect of legal proceedings, 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, 2012. The company assumes no obligation to update any of these forward-looking statements. (unaudited, in millions, except per share data) Fiscal Year Ended Dec 30, % 2,989.6 2,731.8 3,799.6 3,435.9 100.0 100.0 1,620.7 1,496.1 1,089.5 29.0 3,223.5 2,924.8 556.0 5.0 100.0 0.50 14.0 33.0 Segment Results The tables below present reportable segment results net of intersegment eliminations (in millions): Americas Quarter Ended 2,586.4 2,356.2 2,840.7 2,578.6 1,092.5 1,006.7 2,250.4 2,029.7 EMEA Dec 30, Jan 1, % Dec 30, Jan 1, 2012 2012 Change 2012 2012 Quarter Ended China / Asia Pacific (CAP) % Change Quarter Ended Channel Development % Change Quarter Ended Other Quarter Ended Operating loss Supplemental Information The following supplemental information is provided for historical and comparative purposes. Fiscal First Quarter 2013 U.S. Supplemental Data Fiscal First Quarter 2013 Store Data The company’s store data for the periods presented are as follows: (1) EMEA store data has been adjusted for the transfer of certain company-operated stores to licensees in the fourth quarter of fiscal 2012. © 2013 Starbucks Coffee Company. All rights reserved.
Quarter Ended Dec 30, 2012
Comparable Store Sales(1)
Sales Growth Change in Transactions Change in Ticket
Consolidated 6% 4% 2%
Americas 7% 4% 2%
EMEA (1)% 2% (3)%
CAP 11% 8% 3%
(1) Includes only Starbucks company-operated stores open 13 months or longer.
Operating Results Quarter Ended
($ in millions, except per share amounts) Dec 30, 2012 Jan 1, 2012 Change
Net New Stores 212 241 (29)
Revenues $3,799.6 $3,435.9 11%
Operating Income $630.6 $556.0 13%
Operating Margin 16.6% 16.2% 40 bps
EPS $0.57 $0.50 14%
Quarter Ended
($ in millions) Dec 30, 2012 Jan 1, 2012 Change
Net New Stores 80 95 (15)
Revenues $2,840.7 $2,578.6 10%
Operating Income $590.3 $548.9 8%
Operating Margin 20.8% 21.3% (50) bps
Quarter Ended
($ in millions) Dec 30, 2012 Jan 1, 2012 Change
Net New Stores 7 25 (18)
Revenues $306.1 $303.0 1%
Operating Income $22.3 $18.9 18%
Operating Margin 7.3% 6.2% 110 bps
Quarter Ended
($ in millions) Dec 30, 2012 Jan 1, 2012 Change
Net New Stores 125 121 4
Revenues $214.1 $166.9 28%
Operating Income $72.1 $57.3 26%
Operating Margin 33.7% 34.3% (60) bps
Quarter Ended
($ in millions) Dec 30, 2012 Jan 1, 2012 Change
Revenues $379.8 $335.8 13%
Operating Income $96.8 $77.9 24%
Operating Margin 25.5% 23.2% 230 bps
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
Quarter Ended Quarter Ended
Jan 1, Dec 30, Jan 1,
2012 2012 Change 2012 2012
As a % of total
net revenues
Net revenues:
Company-operated stores $ $ 9.4 % 78.7 % 79.5 %
Licensed stores 350.2 306.6 14.2 9.2 8.9
CPG, foodservice and other 459.8 397.5 15.7 12.1 11.6
Total net revenues 10.6
Cost of sales including occupancy costs 8.3 42.7 43.5
Store operating expenses 995.7 9.4 28.7
Other operating expenses 132.5 106.7 24.2 3.5 3.1
Depreciation and amortization expenses 148.9 134.8 10.5 3.9 3.9
General and administrative expenses 231.9 191.5 21.1 6.1 5.6
Total Operating Expenses 10.2 84.8 85.1
Income from equity investees 54.5 44.9 21.4 1.4 1.3
Operating income 630.6 13.4 16.6 16.2
Interest income and other, net (2.9 ) 23.2 nm (0.1 ) 0.7
Interest expense (6.6 ) (8.6 ) (23.3 ) (0.2 ) (0.3 )
Earnings before income taxes 621.1 570.6 8.9 16.3 16.6
Income taxes 188.7 188.4 0.2 5.5
Net earnings including noncontrolling interest 432.4 382.2 13.1 11.4 11.1
Net earnings attributable to noncontrolling interest 0.2 0.1 — —
Net earnings attributable to Starbucks $ 432.2 $ 382.1 13.1 % 11.4 % 11.1 %
Net earnings per common share - diluted $ 0.57 $ %
Weighted avg. shares outstanding - diluted 761.3 768.5
Cash dividends declared per share $ 0.21 $ 0.17
Supplemental Ratios:
Store operating expenses as a percentage of company-operated stores revenue 36.4 % 36.4 %
Effective tax rate including noncontrolling interest 30.4 % %
Dec 30, Jan 1, % Dec 30, Jan 1,
2012 2012 Change 2012 2012
As a % of Americas
total net revenues
Net revenues:
Company-operated stores $ $ 9.8 % 91.0 % 91.4 %
Licensed stores 239.2 216.4 10.5 8.4 8.4
CPG, foodservice and other 15.1 6.0 151.7 0.5 0.2
Total net revenues 10.2 100.0 100.0
Cost of sales including occupancy costs 8.5 38.5 39.0
Store operating expenses 959.8 874.8 9.7 33.8 33.9
Other operating expenses 30.0 20.5 46.3 1.1 0.8
Depreciation and amortization expenses 105.4 97.1 8.5 3.7 3.8
General and administrative expenses 62.7 30.6 104.9 2.2 1.2
Total Operating Expenses 10.9 79.2 78.7
Operating income $ 590.3 $ 548.9 7.5 % 20.8 % 21.3 %
Supplemental Ratios:
Store operating expenses as a percentage of company-operated stores revenue 37.1 % 37.1 %
As a % of EMEA
total net revenues
Net revenues:
Company-operated stores $ 252.7 $ 264.3 (4.4 )% 82.6 % 87.2 %
Licensed stores 43.9 31.2 40.7 14.3 10.3
CPG, foodservice and other 9.5 7.5 26.7 3.1 2.5
Total net revenues 306.1 303.0 1.0 100.0 100.0
Cost of sales including occupancy costs 152.5 150.4 1.4 49.8 49.6
Store operating expenses 90.3 93.8 (3.7 ) 29.5 31.0
Other operating expenses 8.4 8.6 (2.3 ) 2.7 2.8
Depreciation and amortization expenses 14.2 14.2 — 4.6 4.7
General and administrative expenses 18.4 17.4 5.7 6.0 5.7
Total Operating Expenses 283.8 284.4 (0.2 ) 92.7 93.9
Income from equity investees — 0.3 (100.0 ) — 0.1
Operating income $ 22.3 $ 18.9 18.0 % 7.3 % 6.2 %
Supplemental Ratios:
Store operating expenses as a percentage of company-operated stores revenue 35.7 % 35.5 %
Dec 30, Jan 1, Dec 30, Jan 1,
2012 2012 2012 2012
As a % of CAP
total net revenues
Net revenues:
Company-operated stores $ 150.5 $ 111.3 35.2 % 70.3 % 66.7 %
Licensed stores 63.6 55.6 14.4 29.7 33.3
Total net revenues 214.1 166.9 28.3 100.0 100.0
Cost of sales including occupancy costs 106.5 84.5 26.0 49.7 50.6
Store operating expenses 39.4 27.1 45.4 18.4 16.2
Other operating expenses 10.2 11.4 (10.5 ) 4.8 6.8
Depreciation and amortization expenses 7.4 5.0 48.0 3.5 3.0
General and administrative expenses 12.6 9.2 37.0 5.9 5.5
Total Operating Expenses 176.1 137.2 28.4 82.3 82.2
Income from equity investees 34.1 27.6 23.6 15.9 16.5
Operating income $ 72.1 $ 57.3 25.8 % 33.7 % 34.3 %
Supplemental Ratios:
Store operating expenses as a percentage of company-operated stores revenue 26.2 % 24.3 %
Dec 30, Jan 1, Dec 30, Jan 1,
2012 2012 2012 2012
As a % of
Channel Development
total net revenues
Net revenues:
CPG $ 288.3 $ 247.1 16.7 % 75.9 % 73.6 %
Foodservice 91.5 88.7 3.2 24.1 26.4
Total net revenues 379.8 335.8 13.1 100.0 100.0
Cost of sales 235.2 220.6 6.6 61.9 65.7
Other operating expenses 63.1 50.1 25.9 16.6 14.9
Depreciation and amortization expenses 0.3 0.4 (25.0 ) 0.1 0.1
General and administrative expenses 4.8 3.8 26.3 1.3 1.1
Total Operating Expenses 303.4 274.9 10.4 79.9 81.9
Income from equity investees 20.4 17.0 20.0 5.4 5.1
Operating income $ 96.8 $ 77.9 24.3 % 25.5 % 23.2 %
Dec 30, Jan 1, %
2012 2012 Change
Net revenues:
Licensed stores $ 3.5 $ 3.4 2.9 %
CPG, foodservice and other 55.4 48.2 14.9
Total net revenues 58.9 51.6 14.1
Cost of sales 34.0 33.9 0.3
Other operating expenses 20.8 16.1 29.2
Depreciation and amortization expenses 21.6 18.1 19.3
General and administrative expenses 133.4 130.5 2.2
Total Operating Expenses 209.8 198.6 5.6
$ (150.9 ) $ (147.0 ) 2.7 %
Quarter Ended
($ in millions) Dec 30, 2012 Jan 1, 2012 Change
Comparable Store Sales Growth 7% 9%
Change in Transactions 4% 8%
Change in Ticket 2% 2%
Revenues $2,503.9 $2,291.8 9%
Operating Income $587.9 $522.2 13%
Operating Margin 23.5% 22.8% 70 bps
Net stores opened (closed) during the
period
Quarter Ended Stores open as of
Dec 30, Jan 1, Dec 30, Jan 1,
2012 2012 2012 2012
Americas:
Company-operated 30 11 7,887 7,634
Licensed stores 50 84 5,096 4,860
80 95 12,983 12,494
EMEA:
Company-operated(1)
(20 ) 8 862 880
Licensed stores(1)
27 17 1,014 903
7 25 1,876 1,783
CAP:
Company-operated 47 35 713 547
Licensed stores 78 86 2,706 2,420
125 121 3,419 2,967
Total 212 241 18,278 17,244
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