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Starbucks Corp. (Nasdaq:SBUX) 3QFY2011 Record EPS Increases 33% to $0.36 Year-Over-Year
SEATTLE–Thursday July 28, 2011, (CRWENEWSWIRE)– Starbucks Corporation (NASDAQ:SBUX) reported financial results for its fiscal third quarter ended July 3, 2011 and introduced FY12 targets.
Fiscal Third Quarter 2011 Highlights:
Total net revenues increased 12% to $2.9 billion
Global comparable store sales increased 8%, driven by a 6% increase in traffic and a 2% increase in average ticket
Consolidated operating margin was 13.7%, up 120 basis points over prior-year period’s GAAP results and 40 basis points over prior-year period’s non-GAAP results
U.S. operating margin improved 300 basis points to 18.8% on a GAAP basis and 210 basis points over the prior-year period’s non-GAAP results
International operating margin improved 200 basis points to 12.2% on a GAAP basis and 140 basis points over the prior-year period’s non-GAAP results
Global CPG operating income increased to $66.0 million, up 20% over prior-year period
EPS increased 33% to $0.36 in Q3 FY11 compared to $0.27 in Q3 FY10
The Board of Directors declared a $0.13 per share cash dividend to shareholders of record as of August 10, 2011, which will be paid on August 26, 2011
“Starbucks record third quarter results reflect both the underlying strength and continuing momentum we have been experiencing across all of our business segments and around the world,” said Howard Schultz, chairman, president and ceo. “These results demonstrate the power, and the extraordinary global potential, of our unique new business model. Starbucks has never been healthier, more connected to our customers and partners, or better positioned to go after the tremendous business opportunities that lie ahead,” Schultz added.
“The exceptional results that we reported today for our fiscal third quarter are a testament to the strength of the Starbucks brand, to the depth of the company’s organizational capabilities, and to the dedication of our partners around the world,” commented Troy Alstead, cfo. “Efforts to enhance the store experience continue to resonate with our customers as strong traffic gains and sales leverage helped mitigate the impact of higher commodity costs. With our global store portfolio performing at record levels and momentum building in CPG, we have a solid foundation in place to pursue continued profitable growth in fiscal 2012 and beyond. As we build upon the strength of the brand and our evolving multi-channel strategy, we expect to drive growth in earnings per share in fiscal 2012 in the range of 15 to 20 percent.”
Third Quarter Fiscal 2011 Summary
| Quarter Ended July 3, 2011 | |||
|---|---|---|---|
|
Sales Growth
|
Change in Transactions
|
Change in Ticket
|
|
|
Comparable Store Sales
|
8%
|
6%
|
2%
|
|
Consolidated
|
8%
|
6%
|
2%
|
|
United States
|
5%
|
4%
|
1%
|
|
International
|
|||
|
Operating Results ($ in millions, except per share amounts)
|
Quarter Ended
|
||
|
July 3, 2011
|
June 27, 2010
|
Change
|
|
|
Revenues
|
$ 2,932.2
|
$ 2,612.0
|
12%
|
|
Operating Income(1)
|
$ 402.2
|
$ 327.7
|
23%
|
|
Operating Margin(2)
|
13.7%
|
12.5%
|
120 bps
|
|
EPS(3)
|
$ 0.36
|
$ 0.27
|
33%
|
(2) Non-GAAP operating margin for Q3 FY10 was 13.3%, resulting in a 40 bps increase.
(3) Non-GAAP EPS for Q3 FY10 was $0.29, resulting in a 24% increase.
See the reconciliation of selected GAAP measures to Non-GAAP measures at the end of this document for further detail.
Consolidated net revenues were $2.9 billion for Q3 FY11, an increase of 12% over Q3 FY10. The increase was primarily due to an 8% increase in global comparable stores sales and the favorable impact of foreign currency exchange. The 8% increase in comparable store sales was comprised of a 6% increase in the number of transactions and a 2% increase in average ticket.
Operating income for Q3 FY11 totaled $402.2 million, representing operating margin expansion of 120 basis points to 13.7%. This improvement was primarily due to increased sales leverage, partially offset by higher commodity costs. The increase in commodity costs, primarily coffee, negatively impacted operating margin in the quarter by approximately 280 basis points and EPS by $0.07.
Q3 U.S. Segment Results
|
Quarter Ended
|
|||
| ($ in millions) |
July 3, 2011
|
June 27, 2010
|
Change
|
|
Revenues
|
$ 2,013.9
|
$ 1,852.9
|
9%
|
|
Operating Income(1)
|
$ 378.6
|
$ 292.3
|
30%
|
|
Operating Margin(2)
|
18.8%
|
15.8%
|
300 bps
|
(1) Non-GAAP operating income for Q3 FY10 was $309.2 million, resulting in a 22% increase.
(2) Non-GAAP operating margin for Q3 FY10 was 16.7%, resulting in a 210 bps increase.
See the reconciliation of selected GAAP measures to Non-GAAP measures at the end of this document for further detail.
U.S. net revenues were $2.0 billion in Q3 FY11, an increase of 9% over Q3 FY10. The increase was primarily due to an 8% increase in comparable store sales, comprised of a 6% increase in the number of transactions and a 2% increase in average ticket.
U.S. operating income for Q3 FY11 was $378.6 million compared to $292.3 million for the same period a year ago. Operating margin expanded 300 basis points to 18.8% in Q3 FY11 compared to 15.8% in the corresponding period of fiscal 2010. The margin expansion was primarily due to increased sales leverage and the absence of restructuring charges in FY11, partially offset by higher coffee costs.
Q3 International Segment Results
|
Quarter Ended
|
|||
| ($ in millions) |
July 3, 2011
|
June 27, 2010
|
Change
|
|
Revenues
|
$ 658.5
|
$ 548.6
|
20%
|
|
Operating Income(1)
|
$ 80.4
|
$ 55.9
|
44%
|
|
Operating Margin(2)
|
12.2%
|
10.2%
|
200 bps
|
(1) Non-GAAP operating income for Q3 FY10 was $59.4 million, resulting in a 35% increase.
(2) Non-GAAP operating margin for Q3 FY10 was 10.8%, resulting in a 140 bps increase.
See the reconciliation of selected GAAP measures to Non-GAAP measures at the end of this document for further detail.
International net revenues were $658.5 million in Q3 FY11, an increase of 20% over Q3 FY10. The increase was due to the favorable impact of foreign exchange rates and a 5% increase in comparable store sales. The 5% increase in comparable store sales was the result of a 4% increase in the number of transactions and a 1% increase in average ticket.
International operating income increased to $80.4 million in Q3 FY11, compared to $55.9 million for the same period a year ago, with the related operating margin expanding 200 basis points to 12.2% from 10.2% in Q3 FY10. The margin increase was primarily driven by increased sales leverage, partially offset by higher coffee costs.
Q3 Global Consumer Products Group Segment Results
|
Quarter Ended
|
|||
| ($ in millions) |
July 3, 2011
|
June 27, 2010
|
Change
|
|
Revenues
|
$ 218.4
|
$ 174.3
|
25%
|
|
Operating Income
|
$ 66.0
|
$ 54.9
|
20%
|
|
Operating Margin
|
30.2%
|
31.5%
|
-130 bps
|
CPG net revenues were $218.4 million in Q3 FY11, an increase of 25% over Q3 FY10. The increase was primarily due to the benefit of recognizing the full revenue from packaged coffee and tea sales under the direct distribution model.
Operating income for the CPG segment was $66.0 million in Q3 FY11 compared to $54.9 million in Q3 FY10, with the operating margin decreasing to 30.2% of net revenues from 31.5% in the prior-year period. This decrease in operating margin was primarily due to higher coffee costs, partially offset by lower marketing costs for Starbucks VIA® Ready Brew compared to the prior-year period.
|
($ in millions, except per share amounts)
|
3 Quarters Ended
|
||
|---|---|---|---|
|
July 3, 2011
|
June 27, 2010
|
Change
|
|
|
Net New Stores
|
160
|
102
|
58
|
|
Revenues
|
$8,668.7
|
$ 7,869.4
|
10%
|
|
Operating Income(1)
|
$ 1,280.3
|
$ 1,020.1
|
26%
|
|
Operating Margin(2)
|
14.8%
|
13.0%
|
180 bps
|
|
EPS(3)
|
$ 1.15
|
$ 0.87
|
32%
|
(2) Non-GAAP operating margin for YTD Q3 FY10 was 13.6%, resulting in a 120 bps increase.
(3) Non-GAAP EPS for YTD Q3 FY10 was $0.91, resulting in a 26% increase.
See the reconciliation of selected GAAP measures to Non-GAAP measures at the end of this document for further detail.
The company now expects to add approximately 600 net new stores (excluding the impact from Borders store closures), with approximately 100 in the U.S. and 500 in International markets.
Including the impact from Borders store closures, Starbucks is now targeting full-year consolidated operating margin improvement of 50 to 100 basis points over fiscal 2010 non-GAAP results.
Full-year operating margins for both the U.S. and International segments are now expected to finish near the high end of the 150 to 200 basis point improvement range compared to fiscal 2010 non-GAAP results.
Operating margin for the CPG segment is now expected to finish near the high end of the 25% to 30% range.
Starbucks now expects earnings per share in the range of $1.50 to $1.51, modestly above the previously communicated 15% to 20% growth over fiscal 2010 non-GAAP EPS on a comparable 52-week basis.
Approximately 200 net new stores in the U.S., with approximately half of the additions being licensed stores.
Approximately 600 net new stores outside the U.S., with licensed stores comprising approximately two-thirds of the new additions. Net new store openings in China are expected to be approximately one-quarter of the total International new store additions.
The company is targeting approximately 10% revenue growth, driven by mid-single-digit comparable store sales growth, 800 net new store openings, and strong growth in the CPG business.
Starbucks is targeting full-year operating margin improvement of 50 to 100 basis points on a consolidated basis, driven by improvement in both the U.S. and International segments. Fiscal 2012 CPG margin is expected to be approximately 25%.
The company expects earnings per share growth in the range of 15% to 20%, consistent with its long-term outlook, and including the unfavorable impact of approximately $0.21 attributable to higher coffee costs.
Capital expenditures are expected to be approximately $700 million for the full year.
In May, Starbucks completed an agreement with long-term joint-venture partner Maxim’s Caterers Ltd. to acquire full ownership of its retail operations in Central, South and Western China, as part of the company’s broader strategy to build China as its largest market outside of the U.S.
Earlier this month, Starbucks announced a new leadership structure to accelerate global growth in fiscal 2012 and beyond, moving to a three-region organizational structure for its retail businesses: the Americas, China and Asia Pacific, and EMEA.
In May, the company announced that Joshua Cooper Ramo, Managing Director at Kissinger Associates, was elected to the Starbucks Board of Directors, and will serve on the Nominating and Corporate Governance Committee.
JoAnn DeGrande, 206-318-7118
investorrelations@starbucks.com
or
Starbucks Contact, Media:
Alan Hilowitz, 206-318-7100
press@starbucks.com
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