Washington | 0-20322 | 91-1325671 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
2401 Utah Avenue South, Seattle, Washington 98134 |
(Address of principal executive offices) (Zip Code) |
(206) 447-1575 |
(Registrant’s telephone number, including area code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit No. | Description | |
99.1 | Earnings release of Starbucks Corporation dated April 26, 2018 |
STARBUCKS CORPORATION | |||
Dated: April 26, 2018 | |||
By: | /s/ Scott Maw | ||
Scott Maw | |||
executive vice president, chief financial officer |
Exhibit No. | Description | |
• | 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 $2.0 billion to shareholders in the quarter through a combination of dividends and share repurchases |
Quarter Ended Apr 1, 2018 | |||||
Comparable Store Sales(1) | Sales Growth | Change in Transactions | Change in Ticket | ||
Consolidated | 2% | (1)% | 3% | ||
Americas | 2% | 0% | 3% | ||
CAP | 3% | 0% | 3% | ||
EMEA(2) | (1)% | (4)% | 3% | ||
(1) Includes only Starbucks company-operated stores open 13 months or longer. Comparable store sales exclude the effect of fluctuations in foreign currency exchange rates. | |||||
(2) Company-operated stores represent 16% of the EMEA segment store portfolio as of April 1, 2018. |
Operating Results | Quarter Ended | Change | |||
($ 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 | $0.45 | 4% | ||
(1) Q2 2018 net new stores include the closure of 298 Teavana-branded stores. |
Quarter Ended | Change | ||||
($ 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 | $826.1 | (3)% | ||
Operating Margin | 20.0% | 22.2% | (220) bps |
Quarter Ended | Change | ||||
($ 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 | $175.9 | 16% | ||
Operating Margin | 17.2% | 22.9% | (570) bps |
Quarter Ended | Change | ||||
($ 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) | $27.7 | (116)% | ||
Operating Margin | (1.6)% | 12.0% | (1,360) bps |
Quarter Ended | Change | ||||
($ in millions) | Apr 1, 2018 | Apr 2, 2017 | |||
Revenues | $500.2 | $461.3 | 8% | ||
Operating Income | $215.3 | $193.6 | 11% | ||
Operating Margin | 43.0% | 42.0% | 100 bps |
Quarter Ended | Change | ||||
($ in millions) | Apr 1, 2018 | Apr 2, 2017 | |||
Net New Stores | (297) | (6) | (291) | ||
Revenues | $75.6 | $111.7 | (32)% | ||
Operating Loss | $(114.8) | $(25.5) | 350% |
Two Quarters Ended April 1, 2018 | |||||
Comparable Store Sales(1) | Sales Growth | Change in Transactions | Change in Ticket | ||
Consolidated | 2% | 0% | 2% | ||
Americas | 2% | 0% | 2% | ||
CAP | 2% | 0% | 2% | ||
EMEA(2) | (1)% | (4)% | 3% | ||
(1) Includes only Starbucks company-operated stores open 13 months or longer. Comparable store sales exclude the effect of fluctuations in foreign currency exchange rates. | |||||
(2) Company-operated stores represent 16% of the EMEA segment store portfolio as of April 1, 2018. |
Operating Results | Two Quarters Ended | Change | |||
($ 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. |
• | 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 |
• | 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. |
Starbucks Contact, Investor Relations: | Starbucks Contact, Media: | |
Tom Shaw | Reggie Borges | |
206-318-7118 | 206-318-7100 | |
investorrelations@starbucks.com | press@starbucks.com |
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. |
Two Quarters Ended | Two Quarters 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 | $ | 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. |
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. |
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 | % |
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. |
Apr 1, 2018 | Apr 2, 2017 | % Change | Apr 1, 2018 | Apr 2, 2017 | |||||||||||||
Quarter Ended | As a % of Channel 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. |
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 $2.1 million for the quarter and two quarters ended April 1, 2018, respectively, was recorded in cost of sales including occupancy costs related to inventory write-offs. |
Quarter Ended | |||||
($ 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. |
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 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. |
($ 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. |
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