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 | |
STARBUCKS CORPORATION | |||
Dated: July 26, 2018 | |||
By: | /s/ Scott Maw | ||
Scott Maw | |||
executive vice president, chief financial officer |
• | Global comparable store sales increased 1%, driven by a 3% increase in average ticket |
◦ | Americas and U.S. comparable store sales increased 1% |
◦ | CAP comparable store sales decreased 1% |
▪ | China comparable store sales decreased 2% |
• | Consolidated net revenues of $6.3 billion, up 11% over the prior year including: |
◦ | 3% net benefit from consolidation of the 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 |
◦ | 1% benefit from foreign currency translation |
• | GAAP operating margin, inclusive of restructuring and impairment charges, declined 190 basis points year-over-year to 16.5% |
◦ | Non-GAAP operating margin of 18.5% declined 230 basis points compared to the prior year |
• | GAAP Earnings Per Share of $0.61, up 30% over the prior year |
◦ | Non-GAAP EPS of $0.62, up 13% over the prior year |
◦ | GAAP and non-GAAP EPS include $0.02 of unfavorability associated with May 29th anti-bias training |
• | Starbucks RewardsTM loyalty program added 1.9 million active members in the U.S., up 14% year-over-year; total member spend now represents 40% of U.S. company-operated sales |
• | Mobile Order and Pay represented 13% of U.S. company-operated transactions |
• | The company opened 511 net new stores in Q3 and now operates 28,720 stores across 77 markets |
• | The company returned $1.3 billion to shareholders through a combination of dividends and share repurchases |
Quarter Ended Jul 1, 2018 | |||||
Comparable Store Sales(1) | Sales Growth | Change in Transactions | Change in Ticket | ||
Consolidated | 1% | (2)% | 3% | ||
Americas | 1% | (2)% | 4% | ||
CAP | (1)% | (3)% | 2% | ||
EMEA(2) | 0% | (2)% | 3% | ||
(1) Includes only Starbucks company-operated stores open 13 months or longer. Comparable store sales exclude the effect of fluctuations in foreign currency exchange rates. | |||||
(2) Company-operated stores represent 15% of the EMEA segment store portfolio as of July 1, 2018. |
Operating Results | Quarter Ended | Change | |||
($ in millions, except per share amounts) | Jul 1, 2018 | Jul 2, 2017 | |||
Net New Stores | 511 | 575 | (64) | ||
Revenues | $6,310.3 | $5,661.5 | 11% | ||
Operating Income | $1,038.2 | $1,044.2 | (1)% | ||
Operating Margin | 16.5% | 18.4% | (190) bps | ||
EPS | $0.61 | $0.47 | 30% |
Quarter Ended | Change | ||||
($ in millions) | Jul 1, 2018 | Jul 2, 2017 | |||
Net New Stores | 180 | 244 | (64) | ||
Revenues | $4,230.6 | $3,991.9 | 6% | ||
Operating Income | $908.7 | $974.8 | (7)% | ||
Operating Margin | 21.5% | 24.4% | (290) bps |
Quarter Ended | Change | ||||
($ in millions) | Jul 1, 2018 | Jul 2, 2017 | |||
Net New Stores | 257 | 250 | 7 | ||
Revenues | $1,229.0 | $840.6 | 46% | ||
Operating Income | $234.1 | $223.8 | 5% | ||
Operating Margin | 19.0% | 26.6% | (760) bps |
Quarter Ended | Change | ||||
($ in millions) | Jul 1, 2018 | Jul 2, 2017 | |||
Net New Stores | 76 | 87 | (11) | ||
Revenues | $275.4 | $249.9 | 10% | ||
Operating Income | $34.9 | $9.8 | 256% | ||
Operating Margin | 12.7% | 3.9% | 880 bps |
Quarter Ended | Change | ||||
($ in millions) | Jul 1, 2018 | Jul 2, 2017 | |||
Revenues | $509.0 | $478.7 | 6% | ||
Operating Income | $212.8 | $210.2 | 1% | ||
Operating Margin | 41.8% | 43.9% | (210) bps |
Quarter Ended | Change | ||||
($ in millions) | Jul 1, 2018 | Jul 2, 2017 | |||
Net New Stores | (2) | (6) | 4 | ||
Revenues | $66.3 | $100.4 | (34)% | ||
Operating Loss | $(9.8) | $(112.3) | (91)% |
Three Quarters Ended Jul 1, 2018 | |||||
Comparable Store Sales(1) | Sales Growth | Change in Transactions | Change in Ticket | ||
Consolidated | 2% | (1)% | 3% | ||
Americas | 2% | (1)% | 3% | ||
CAP | 1% | (1)% | 2% | ||
EMEA(2) | (1)% | (4)% | 3% | ||
(1) Includes only Starbucks company-operated stores open 13 months or longer. Comparable store sales exclude the effect of fluctuations in foreign currency exchange rates. | |||||
(2) Company-operated stores represent 15% of the EMEA segment store portfolio as of July 1, 2018. |
Operating Results | Three Quarters Ended | Change | |||
($ in millions, except per share amounts) | Jul 1, 2018 | Jul 2, 2017 | |||
Net New Stores (1) | 1,381 | 1,651 | (270) | ||
Revenues | $18,415.9 | $16,688.5 | 10% | ||
Operating Income | $2,926.9 | $3,112.1 | (6)% | ||
Operating Margin | 15.9% | 18.6% | (270) bps | ||
EPS | $2.67 | $1.43 | 87% | ||
(1) Fiscal 2018 net new stores include the net closure of 303 Teavana-branded stores. |
• | Continues to expect approximately 2,300 net new Starbucks stores globally |
• | Now expects full year global comparable store sales growth to be just below the 3-5% targeted range; Q4 expected to be at the lower end of the 3-5% range |
• | Continues 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 |
• | Now expects GAAP EPS in the range of $3.26 to $3.28 and non-GAAP EPS in the range of $2.40 to $2.42 |
• | In May, Starbucks announced it will form a global coffee alliance with Nestlé S.A. to accelerate and grow the global reach of Starbucks brands in Consumer Packaged Goods (CPG) and Foodservice. As part of the alliance, Nestlé will obtain the rights to market, sell, and distribute Starbucks®, Seattle’s Best Coffee®, Starbucks Reserve®, Teavana™, Starbucks VIA® and Torrefazione Italia® packaged coffee and tea in all global at-home and away-from-home channels. Nestlé will pay Starbucks $7.15 billion in closing consideration, and Starbucks - with a focus on long term shareholder value creation - will retain a significant stake as licensor and supplier of roast and ground and other products going forward. Additionally, the Starbucks brand portfolio will be represented on Nestlé’s single-serve capsule systems. The agreement is expected to close in Q4 FY18. |
• | In June, the company announced that Howard Schultz would step down as executive chairman and member of the Board of Directors and be honored with the title of chairman emeritus effective June 26, 2018. Concurrently, Myron E. “Mike” Ullman was appointed as the new chair of the Board and Mellody Hobson as vice chair of the Board upon Schultz’s retirement. |
• | Starbucks announced that Scott Maw, executive vice president and chief financial officer, will retire effective November 30, 2018. Starbucks has launched an external search for a new cfo. After his retirement, Maw will continue to support the transition in a senior consultant role through March 2019. |
• | On June 19, Starbucks announced a set of strategic priorities and corresponding operational initiatives to accelerate growth and create long-term shareholder value. Full details of the release and corresponding presentation may be found on the company's website at http://investor.starbucks.com. |
• | Starbucks hosted its first-ever China Investor Day in Shanghai on May 16, where the company announced plans to build 600 net new stores annually over the next five years in Mainland China - a goal that will double the market’s store count from the end of FY17 to 6,000 across 230 cities by FY22. |
• | The company announced it will phase out plastic straws from more than 28,000 stores worldwide by 2020, resulting in the elimination of more than 1 billion straws per year. Customers who prefer or need a straw can request one made of alternative materials for use with any cold drink. |
• | Starbucks announced that it closed more than 8,000 company-owned stores and its corporate offices in the U.S. on May 29 to conduct racial-bias training for partners (employees). The training was provided to nearly 175,000 partners across the country and will become part of the onboarding process for new partners. Afterwards, the company made the education materials available to other companies, including its licensees. |
• | Starbucks and Chase announced the availability of the Starbucks Rewards™ Visa® Prepaid Card in June, the first prepaid or debit product where you can earn Stars outside of Starbucks. |
• | Along with its licensed partner Alsea, Starbucks opened its first store in Uruguay in April, marking the brand’s 77th market globally and 18th in the Latin America and Caribbean region. |
• | The company repurchased 17.1 million shares of common stock in Q3 FY18; approximately 107 million shares remain available for purchase under current authorizations. |
• | As previously announced, the Board of Directors declared a cash dividend of $0.36 per share, payable on August 24, 2018, to shareholders of record as of August 9, 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 | ||||||||||||||||
Jul 1, 2018 | Jul 2, 2017 | % Change | Jul 1, 2018 | Jul 2, 2017 | |||||||||||||
As a % of total net revenues | |||||||||||||||||
Net revenues: | |||||||||||||||||
Company-operated stores | $ | 5,060.4 | $ | 4,509.0 | 12.2 | % | 80.2 | % | 79.6 | % | |||||||
Licensed stores | 660.6 | 588.3 | 12.3 | 10.5 | 10.4 | ||||||||||||
CPG, foodservice and other | 589.3 | 564.2 | 4.4 | 9.3 | 10.0 | ||||||||||||
Total net revenues | 6,310.3 | 5,661.5 | 11.5 | 100.0 | 100.0 | ||||||||||||
Cost of sales including occupancy costs | 2,554.9 | 2,249.1 | 13.6 | 40.5 | 39.7 | ||||||||||||
Store operating expenses | 1,825.0 | 1,628.9 | 12.0 | 28.9 | 28.8 | ||||||||||||
Other operating expenses | 148.0 | 142.5 | 3.9 | 2.3 | 2.5 | ||||||||||||
Depreciation and amortization expenses | 330.0 | 252.6 | 30.6 | 5.2 | 4.5 | ||||||||||||
General and administrative expenses | 468.7 | 325.0 | 44.2 | 7.4 | 5.7 | ||||||||||||
Restructuring and impairments (1) | 16.9 | 120.2 | (85.9 | ) | 0.3 | 2.1 | |||||||||||
Total operating expenses | 5,343.5 | 4,718.3 | 13.3 | 84.7 | 83.3 | ||||||||||||
Income from equity investees | 71.4 | 101.0 | (29.3 | ) | 1.1 | 1.8 | |||||||||||
Operating income | 1,038.2 | 1,044.2 | (0.6 | ) | 16.5 | 18.4 | |||||||||||
Gain resulting from acquisition of joint venture | 2.5 | — | nm | — | — | ||||||||||||
Interest income and other, net | 31.5 | 31.7 | (0.6 | ) | 0.5 | 0.6 | |||||||||||
Interest expense | (45.4 | ) | (23.5 | ) | 93.2 | (0.7 | ) | (0.4 | ) | ||||||||
Earnings before income taxes | 1,026.8 | 1,052.4 | (2.4 | ) | 16.3 | 18.6 | |||||||||||
Income tax expense | 174.8 | 361.1 | (51.6 | ) | 2.8 | 6.4 | |||||||||||
Net earnings including noncontrolling interests | 852.0 | 691.3 | 23.2 | 13.5 | 12.2 | ||||||||||||
Net loss attributable to noncontrolling interests | (0.5 | ) | (0.3 | ) | 66.7 | — | — | ||||||||||
Net earnings attributable to Starbucks | $ | 852.5 | $ | 691.6 | 23.3 | 13.5 | % | 12.2 | % | ||||||||
Net earnings per common share - diluted | $ | 0.61 | $ | 0.47 | 29.8 | % | |||||||||||
Weighted avg. shares outstanding - diluted | 1,388.5 | 1,459.4 | |||||||||||||||
Cash dividends declared per share | $ | 0.36 | $ | 0.25 | |||||||||||||
Supplemental Ratios: | |||||||||||||||||
Store operating expenses as a % of company-operated store revenues | 36.1 | % | 36.1 | % | |||||||||||||
Other operating expenses as a % of non-company-operated store revenues | 11.8 | % | 12.4 | % | |||||||||||||
Effective tax rate including noncontrolling interests | 17.0 | % | 34.3 | % |
(1) | Primarily represents asset impairments of $17.1 million associated with the anticipated closure of certain U.S. company-operated stores recorded in FY18. FY17 included goodwill impairment and other asset impairment charges of $69.3 million and $33.0 million, respectively, associated with our Teavana-branded stores and goodwill impairment of $17.9 million related to our Switzerland retail business. |
Three Quarters Ended | Three Quarters Ended | ||||||||||||||||
Jul 1, 2018 | Jul 2, 2017 | % Change | Jul 1, 2018 | Jul 2, 2017 | |||||||||||||
As a % of total net revenues | |||||||||||||||||
Net revenues: | |||||||||||||||||
Company-operated stores | $ | 14,630.3 | $ | 13,173.7 | 11.1 | % | 79.4 | % | 78.9 | % | |||||||
Licensed stores | 1,968.6 | 1,737.4 | 13.3 | 10.7 | 10.4 | ||||||||||||
CPG, foodservice and other (1) | 1,817.0 | 1,777.4 | 2.2 | 9.9 | 10.7 | ||||||||||||
Total net revenues | 18,415.9 | 16,688.5 | 10.4 | 100.0 | 100.0 | ||||||||||||
Cost of sales including occupancy costs | 7,573.7 | 6,685.3 | 13.3 | 41.1 | 40.1 | ||||||||||||
Store operating expenses | 5,351.6 | 4,853.5 | 10.3 | 29.1 | 29.1 | ||||||||||||
Other operating expenses | 424.0 | 422.7 | 0.3 | 2.3 | 2.5 | ||||||||||||
Depreciation and amortization expenses | 920.4 | 756.0 | 21.7 | 5.0 | 4.5 | ||||||||||||
General and administrative expenses | 1,253.6 | 1,008.2 | 24.3 | 6.8 | 6.0 | ||||||||||||
Restructuring and impairments (2) | 179.2 | 120.2 | 49.1 | 1.0 | 0.7 | ||||||||||||
Total operating expenses | 15,702.5 | 13,845.9 | 13.4 | 85.3 | 83.0 | ||||||||||||
Income from equity investees | 213.5 | 269.5 | (20.8 | ) | 1.2 | 1.6 | |||||||||||
Operating income | 2,926.9 | 3,112.1 | (6.0 | ) | 15.9 | 18.6 | |||||||||||
Gain resulting from acquisition of joint venture (3) | 1,376.4 | — | nm | 7.5 | — | ||||||||||||
Net gain resulting from divestiture of certain operations (4) | 496.3 | 9.6 | nm | 2.7 | 0.1 | ||||||||||||
Interest income and other, net | 155.2 | 114.1 | 36.0 | 0.8 | 0.7 | ||||||||||||
Interest expense | (106.4 | ) | (70.2 | ) | 51.6 | (0.6 | ) | (0.4 | ) | ||||||||
Earnings before income taxes | 4,848.4 | 3,165.6 | 53.2 | 26.3 | 19.0 | ||||||||||||
Income tax expense | 1,086.5 | 1,070.1 | 1.5 | 5.9 | 6.4 | ||||||||||||
Net earnings including noncontrolling interests | 3,761.9 | 2,095.5 | 79.5 | 20.4 | 12.6 | ||||||||||||
Net loss attributable to noncontrolling interests | (0.9 | ) | (0.6 | ) | 50.0 | — | — | ||||||||||
Net earnings attributable to Starbucks | $ | 3,762.8 | $ | 2,096.1 | 79.5 | 20.4 | % | 12.6 | % | ||||||||
Net earnings per common share - diluted | $ | 2.67 | $ | 1.43 | 86.7 | % | |||||||||||
Weighted avg. shares outstanding - diluted | 1,409.9 | 1,464.9 | |||||||||||||||
Cash dividends declared per share | $ | 0.96 | $ | 0.75 | |||||||||||||
Supplemental Ratios: | |||||||||||||||||
Store operating expenses as a % of company-operated store revenues | 36.6 | % | 36.8 | % | |||||||||||||
Other operating expenses as a % of non-company-operated store revenues | 11.2 | % | 12.0 | % | |||||||||||||
Effective tax rate including noncontrolling interests | 22.4 | % | 33.8 | % |
(1) | CPG revenues in FY17 included an unfavorable revenue deduction adjustment pertaining to prior periods of $13.2 million. |
(2) | Primarily includes restructuring expenses of $129.7 million associated with our Teavana-branded stores, $28.5 million of Switzerland goodwill impairment and $21.0 million related to closing certain company-operated stores in the U.S. and Canada in FY18. FY17 included goodwill impairment and other asset impairment charges of $69.3 million and $33.0 million, respectively, associated with our Teavana-branded stores and goodwill impairment of $17.9 million related to our Switzerland retail business. |
(3) | Represents the gain resulting from the acquisition of our East China joint venture. |
(4) | Primarily includes the gains on the sales of our Tazo brand and Taiwan joint venture for $347.9 million and $156.6 million, respectively. |
Jul 1, 2018 | Jul 2, 2017 | % Change | Jul 1, 2018 | Jul 2, 2017 | |||||||||||||
Quarter Ended | As a % of Americas total net revenues | ||||||||||||||||
Net revenues: | |||||||||||||||||
Company-operated stores | $ | 3,768.5 | $ | 3,576.4 | 5.4 | % | 89.1 | % | 89.6 | % | |||||||
Licensed stores | 452.0 | 404.5 | 11.7 | 10.7 | 10.1 | ||||||||||||
Foodservice and other | 10.1 | 11.0 | (8.2 | ) | 0.2 | 0.3 | |||||||||||
Total net revenues | 4,230.6 | 3,991.9 | 6.0 | 100.0 | 100.0 | ||||||||||||
Cost of sales including occupancy costs | 1,578.1 | 1,441.7 | 9.5 | 37.3 | 36.1 | ||||||||||||
Store operating expenses | 1,447.6 | 1,338.8 | 8.1 | 34.2 | 33.5 | ||||||||||||
Other operating expenses | 34.1 | 33.1 | 3.0 | 0.8 | 0.8 | ||||||||||||
Depreciation and amortization expenses | 159.3 | 152.8 | 4.3 | 3.8 | 3.8 | ||||||||||||
General and administrative expenses | 84.4 | 50.7 | 66.5 | 2.0 | 1.3 | ||||||||||||
Restructuring and impairments(1) | 18.4 | — | nm | 0.4 | — | ||||||||||||
Total operating expenses | 3,321.9 | 3,017.1 | 10.1 | 78.5 | 75.6 | ||||||||||||
Operating income | $ | 908.7 | $ | 974.8 | (6.8 | )% | 21.5 | % | 24.4 | % | |||||||
Supplemental Ratios: | |||||||||||||||||
Store operating expenses as a % of company-operated store revenues | 38.4 | % | 37.4 | % | |||||||||||||
Other operating expenses as a % of non-company-operated store revenues | 7.4 | % | 8.0 | % | |||||||||||||
Three Quarters Ended | |||||||||||||||||
Net revenues: | |||||||||||||||||
Company-operated stores | $ | 11,120.5 | $ | 10,472.3 | 6.2 | % | 89.0 | % | 89.5 | % | |||||||
Licensed stores | 1,348.0 | 1,202.5 | 12.1 | 10.8 | 10.3 | ||||||||||||
Foodservice and other | 31.7 | 28.9 | 9.7 | 0.3 | 0.2 | ||||||||||||
Total net revenues | 12,500.2 | 11,703.7 | 6.8 | 100.0 | 100.0 | ||||||||||||
Cost of sales including occupancy costs | 4,716.3 | 4,236.9 | 11.3 | 37.7 | 36.2 | ||||||||||||
Store operating expenses | 4,292.9 | 3,994.3 | 7.5 | 34.3 | 34.1 | ||||||||||||
Other operating expenses | 106.3 | 96.5 | 10.2 | 0.9 | 0.8 | ||||||||||||
Depreciation and amortization expenses | 477.7 | 460.6 | 3.7 | 3.8 | 3.9 | ||||||||||||
General and administrative expenses | 196.4 | 156.0 | 25.9 | 1.6 | 1.3 | ||||||||||||
Restructuring and impairments(1) | 21.0 | — | nm | 0.2 | — | ||||||||||||
Total operating expenses | 9,810.6 | 8,944.3 | 9.7 | 78.5 | 76.4 | ||||||||||||
Operating income | $ | 2,689.6 | $ | 2,759.4 | (2.5 | )% | 21.5 | % | 23.6 | % | |||||||
Supplemental Ratios: | |||||||||||||||||
Store operating expenses as a % of company-operated store revenues | 38.6 | % | 38.1 | % | |||||||||||||
Other operating expenses as a % of non-company-operated store revenues | 7.7 | % | 7.8 | % |
(1) | Represents restructuring expenses related to closing certain company-operated stores in the U.S. and Canada. |
Jul 1, 2018 | Jul 2, 2017 | % Change | Jul 1, 2018 | Jul 2, 2017 | |||||||||||||
Quarter Ended | As a % of CAP total net revenues | ||||||||||||||||
Net revenues: | |||||||||||||||||
Company-operated stores | $ | 1,136.5 | $ | 756.8 | 50.2 | % | 92.5 | % | 90.0 | % | |||||||
Licensed stores | 90.1 | 82.3 | 9.5 | 7.3 | 9.8 | ||||||||||||
Foodservice and other | 2.4 | 1.5 | 60.0 | 0.2 | 0.2 | ||||||||||||
Total net revenues | 1,229.0 | 840.6 | 46.2 | 100.0 | 100.0 | ||||||||||||
Cost of sales including occupancy costs | 504.8 | 353.5 | 42.8 | 41.1 | 42.1 | ||||||||||||
Store operating expenses | 310.2 | 212.1 | 46.3 | 25.2 | 25.2 | ||||||||||||
Other operating expenses | 20.2 | 17.5 | 15.4 | 1.6 | 2.1 | ||||||||||||
Depreciation and amortization expenses | 120.7 | 51.0 | 136.7 | 9.8 | 6.1 | ||||||||||||
General and administrative expenses | 62.5 | 34.5 | 81.2 | 5.1 | 4.1 | ||||||||||||
Total operating expenses | 1,018.4 | 668.6 | 52.3 | 82.9 | 79.5 | ||||||||||||
Income from equity investees | 23.5 | 51.8 | (54.6 | ) | 1.9 | 6.2 | |||||||||||
Operating income | $ | 234.1 | $ | 223.8 | 4.6 | % | 19.0 | % | 26.6 | % | |||||||
Supplemental Ratios: | |||||||||||||||||
Store operating expenses as a % of company-operated store revenues | 27.3 | % | 28.0 | % | |||||||||||||
Other operating expenses as a % of non-company-operated store revenues | 21.8 | % | 20.9 | % | |||||||||||||
Three Quarters Ended | |||||||||||||||||
Net revenues: | |||||||||||||||||
Company-operated stores | $ | 2,977.6 | $ | 2,136.1 | 39.4 | % | 91.4 | % | 89.7 | % | |||||||
Licensed stores | 272.8 | 238.7 | 14.3 | 8.4 | 10.0 | ||||||||||||
Foodservice and other | 8.7 | 5.5 | 58.2 | 0.3 | 0.2 | ||||||||||||
Total net revenues | 3,259.1 | 2,380.3 | 36.9 | 100.0 | 100.0 | ||||||||||||
Cost of sales including occupancy costs | 1,387.2 | 1,024.3 | 35.4 | 42.6 | 43.0 | ||||||||||||
Store operating expenses | 835.3 | 618.9 | 35.0 | 25.6 | 26.0 | ||||||||||||
Other operating expenses | 60.0 | 54.2 | 10.7 | 1.8 | 2.3 | ||||||||||||
Depreciation and amortization expenses | 296.0 | 148.9 | 98.8 | 9.1 | 6.3 | ||||||||||||
General and administrative expenses | 136.1 | 109.2 | 24.6 | 4.2 | 4.6 | ||||||||||||
Total operating expenses | 2,714.6 | 1,955.5 | 38.8 | 83.3 | 82.2 | ||||||||||||
Income from equity investees | 91.0 | 138.4 | (34.2 | ) | 2.8 | 5.8 | |||||||||||
Operating income | $ | 635.5 | $ | 563.2 | 12.8 | % | 19.5 | % | 23.7 | % | |||||||
Supplemental Ratios: | |||||||||||||||||
Store operating expenses as a % of company-operated store revenues | 28.1 | % | 29.0 | % | |||||||||||||
Other operating expenses as a % of non-company-operated store revenues | 21.3 | % | 22.2 | % |
Jul 1, 2018 | Jul 2, 2017 | % Change | Jul 1, 2018 | Jul 2, 2017 | |||||||||||||
Quarter Ended | As a % of EMEA total net revenues | ||||||||||||||||
Net revenues: | |||||||||||||||||
Company-operated stores | $ | 142.9 | $ | 136.2 | 4.9 | % | 51.9 | % | 54.5 | % | |||||||
Licensed stores | 118.5 | 100.9 | 17.4 | 43.0 | 40.4 | ||||||||||||
Foodservice | 14.0 | 12.8 | 9.4 | 5.1 | 5.1 | ||||||||||||
Total net revenues | 275.4 | 249.9 | 10.2 | 100.0 | 100.0 | ||||||||||||
Cost of sales including occupancy costs | 143.5 | 134.0 | 7.1 | 52.1 | 53.6 | ||||||||||||
Store operating expenses | 58.0 | 53.8 | 7.8 | 21.1 | 21.5 | ||||||||||||
Other operating expenses | 16.0 | 15.1 | 6.0 | 5.8 | 6.0 | ||||||||||||
Depreciation and amortization expenses | 8.0 | 7.7 | 3.9 | 2.9 | 3.1 | ||||||||||||
General and administrative expenses | 15.0 | 11.6 | 29.3 | 5.4 | 4.6 | ||||||||||||
Restructuring and impairments (1) | — | 17.9 | nm | — | 7.2 | ||||||||||||
Total operating expenses | 240.5 | 240.1 | 0.2 | 87.3 | 96.1 | ||||||||||||
Operating income | $ | 34.9 | $ | 9.8 | 256.1 | % | 12.7 | % | 3.9 | % | |||||||
Supplemental Ratios: | |||||||||||||||||
Store operating expenses as a % of company-operated store revenues | 40.6 | % | 39.5 | % | |||||||||||||
Other operating expenses as a % of non-company-operated store revenues | 12.1 | % | 13.3 | % | |||||||||||||
Three Quarters Ended | |||||||||||||||||
Net revenues: | |||||||||||||||||
Company-operated stores | $ | 433.1 | $ | 409.6 | 5.7 | % | 52.5 | % | 55.1 | % | |||||||
Licensed stores | 346.7 | 294.0 | 17.9 | 42.0 | 39.5 | ||||||||||||
Foodservice | 45.5 | 40.3 | 12.9 | 5.5 | 5.4 | ||||||||||||
Total net revenues | 825.3 | 743.9 | 10.9 | 100.0 | 100.0 | ||||||||||||
Cost of sales including occupancy costs | 440.7 | 392.6 | 12.3 | 53.4 | 52.8 | ||||||||||||
Store operating expenses | 170.4 | 151.0 | 12.8 | 20.6 | 20.3 | ||||||||||||
Other operating expenses | 52.3 | 45.3 | 15.5 | 6.3 | 6.1 | ||||||||||||
Depreciation and amortization expenses | 23.8 | 22.9 | 3.9 | 2.9 | 3.1 | ||||||||||||
General and administrative expenses | 40.1 | 32.7 | 22.6 | 4.9 | 4.4 | ||||||||||||
Restructuring and impairments (1) | 28.5 | 17.9 | 59.2 | 3.5 | 2.4 | ||||||||||||
Total operating expenses | 755.8 | 662.4 | 14.1 | 91.6 | 89.0 | ||||||||||||
Operating income | $ | 69.5 | $ | 81.5 | (14.7 | )% | 8.4 | % | 11.0 | % | |||||||
Supplemental Ratios: | |||||||||||||||||
Store operating expenses as a % of company-operated store revenues | 39.3 | % | 36.9 | % | |||||||||||||
Other operating expenses as a % of non-company-operated store revenues | 13.3 | % | 13.6 | % |
(1) | Represents goodwill impairment of our Switzerland retail business. |
Jul 1, 2018 | Jul 2, 2017 | % Change | Jul 1, 2018 | Jul 2, 2017 | |||||||||||||
Quarter Ended | As a % of Channel Development total net revenues | ||||||||||||||||
Net revenues: | |||||||||||||||||
CPG | $ | 392.4 | $ | 364.3 | 7.7 | % | 77.1 | % | 76.1 | % | |||||||
Foodservice | 116.6 | 114.4 | 1.9 | 22.9 | 23.9 | ||||||||||||
Total net revenues | 509.0 | 478.7 | 6.3 | 100.0 | 100.0 | ||||||||||||
Cost of sales | 273.0 | 252.5 | 8.1 | 53.6 | 52.7 | ||||||||||||
Other operating expenses | 67.3 | 62.0 | 8.5 | 13.2 | 13.0 | ||||||||||||
Depreciation and amortization expenses | 0.2 | 0.5 | (60.0 | ) | — | 0.1 | |||||||||||
General and administrative expenses | 3.6 | 2.7 | 33.3 | 0.7 | 0.6 | ||||||||||||
Total operating expenses | 344.1 | 317.7 | 8.3 | 67.6 | 66.4 | ||||||||||||
Income from equity investees | 47.9 | 49.2 | (2.6 | ) | 9.4 | 10.3 | |||||||||||
Operating income | $ | 212.8 | $ | 210.2 | 1.2 | % | 41.8 | % | 43.9 | % | |||||||
Three Quarters Ended | |||||||||||||||||
Net revenues: | |||||||||||||||||
CPG (1) | $ | 1,208.0 | $ | 1,147.6 | 5.3 | % | 77.0 | % | 76.8 | % | |||||||
Foodservice | 361.4 | 346.0 | 4.5 | 23.0 | 23.2 | ||||||||||||
Total net revenues | 1,569.4 | 1,493.6 | 5.1 | 100.0 | 100.0 | ||||||||||||
Cost of sales | 837.3 | 795.5 | 5.3 | 53.4 | 53.3 | ||||||||||||
Other operating expenses | 172.2 | 172.9 | (0.4 | ) | 11.0 | 11.6 | |||||||||||
Depreciation and amortization expenses | 0.9 | 1.7 | (47.1 | ) | 0.1 | 0.1 | |||||||||||
General and administrative expenses | 10.3 | 8.1 | 27.2 | 0.7 | 0.5 | ||||||||||||
Total operating expenses | 1,020.7 | 978.2 | 4.3 | 65.0 | 65.5 | ||||||||||||
Income from equity investees | 122.5 | 131.1 | (6.6 | ) | 7.8 | 8.8 | |||||||||||
Operating income | $ | 671.2 | $ | 646.5 | 3.8 | % | 42.8 | % | 43.3 | % |
(1) | CPG revenues in FY17 included an unfavorable revenue deduction adjustment pertaining to prior periods of $13.2 million. |
Jul 1, 2018 | Jul 2, 2017 | % Change | ||||||||
Quarter Ended | ||||||||||
Net revenues: | ||||||||||
Company-operated stores | $ | 12.5 | $ | 39.6 | (68.4 | )% | ||||
Licensed stores | — | 0.6 | nm | |||||||
CPG, foodservice and other | 53.8 | 60.2 | (10.6 | ) | ||||||
Total net revenues | 66.3 | 100.4 | (34.0 | ) | ||||||
Cost of sales including occupancy costs | 55.3 | 64.8 | (14.7 | ) | ||||||
Store operating expenses | 9.2 | 24.2 | (62.0 | ) | ||||||
Other operating expenses | 10.6 | 14.6 | (27.4 | ) | ||||||
Depreciation and amortization expenses | 1.5 | 3.0 | (50.0 | ) | ||||||
General and administrative expenses | 1.0 | 3.8 | (73.7 | ) | ||||||
Restructuring and impairments (1) | (1.5 | ) | 102.3 | nm | ||||||
Total operating expenses | 76.1 | 212.7 | (64.2 | ) | ||||||
Operating loss | $ | (9.8 | ) | $ | (112.3 | ) | (91.3 | )% | ||
Three Quarters Ended | ||||||||||
Net revenues: | ||||||||||
Company-operated stores | $ | 99.1 | $ | 155.7 | (36.4 | )% | ||||
Licensed stores | 1.1 | 2.2 | (50.0 | ) | ||||||
CPG, foodservice and other | 161.7 | 209.1 | (22.7 | ) | ||||||
Total net revenues | 261.9 | 367.0 | (28.6 | ) | ||||||
Cost of sales including occupancy costs | 192.2 | 229.5 | (16.3 | ) | ||||||
Store operating expenses | 53.0 | 89.3 | (40.6 | ) | ||||||
Other operating expenses | 32.6 | 52.8 | (38.3 | ) | ||||||
Depreciation and amortization expenses | 3.2 | 9.3 | (65.6 | ) | ||||||
General and administrative expenses | 5.6 | 11.7 | (52.1 | ) | ||||||
Restructuring and impairments (1) | 129.7 | 102.3 | 26.8 | |||||||
Total operating expenses | 416.3 | 494.9 | (15.9 | ) | ||||||
Operating loss | $ | (154.4 | ) | $ | (127.9 | ) | 20.7 | % |
Quarter Ended | |||||
($ in millions) | Jul 1, 2018 | Jul 2, 2017 | Change | ||
Revenues | $3,873.8 | $3,653.6 | 6% | ||
Comparable Store Sales Growth(1) | 1% | 5% | |||
Change in Transactions | (3)% | 0% | |||
Change in Ticket | 4% | 5% | |||
(1) Includes only Starbucks company-operated stores open 13 months or longer. |
Net stores opened/(closed) and transferred during the period | |||||||||||||||||
Quarter Ended | Three Quarters Ended | Stores open as of | |||||||||||||||
Jul 1, 2018 | Jul 2, 2017 | Jul 1, 2018 | Jul 2, 2017 | Jul 1, 2018 | Jul 2, 2017 | ||||||||||||
Americas: | |||||||||||||||||
Company-operated stores | 94 | 125 | 177 | 282 | 9,590 | 9,301 | |||||||||||
Licensed stores | 86 | 119 | 468 | 413 | 7,614 | 7,001 | |||||||||||
Total Americas | 180 | 244 | 645 | 695 | 17,204 | 16,302 | |||||||||||
China/Asia Pacific(1): | |||||||||||||||||
Company-operated stores | 163 | 116 | 1,909 | 287 | 4,979 | 3,098 | |||||||||||
Licensed stores | 94 | 134 | (1,136 | ) | 453 | 3,273 | 4,085 | ||||||||||
Total China/Asia Pacific | 257 | 250 | 773 | 740 | 8,252 | 7,183 | |||||||||||
EMEA: | |||||||||||||||||
Company-operated stores | — | 1 | (6 | ) | (17 | ) | 496 | 506 | |||||||||
Licensed stores | 76 | 86 | 269 | 245 | 2,741 | 2,364 | |||||||||||
Total EMEA | 76 | 87 | 263 | 228 | 3,237 | 2,870 | |||||||||||
All Other Segments(2): | |||||||||||||||||
Company-operated stores | 1 | (5 | ) | (285 | ) | (14 | ) | 5 | 344 | ||||||||
Licensed stores | (3 | ) | (1 | ) | (15 | ) | 2 | 22 | 37 | ||||||||
Total All Other Segments | (2 | ) | (6 | ) | (300 | ) | (12 | ) | 27 | 381 | |||||||
Total Company | 511 | 575 | 1,381 | 1,651 | 28,720 | 26,736 | |||||||||||
(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 July 1, 2018, All Other Segments included 22 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. |
Nestlé transaction related costs | Management excludes the transaction related costs associated with Nestlé for reasons discussed above. |
Other tax matters | On December 22, 2017, the Tax Cuts and Jobs Act was signed into U.S. law. Management excludes the estimated transition tax on undistributed foreign earnings 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 | Jul 1, 2018 | Jul 2, 2017 | Change | ||||||
Operating income, as reported (GAAP) | $ | 1,038.2 | $ | 1,044.2 | (0.6)% | ||||
Restructuring, impairment and optimization costs (1) | 21.7 | 120.2 | |||||||
CAP transaction and integration-related items (2) | 75.9 | 14.0 | |||||||
2018 U.S. stock award (3) | 21.6 | — | |||||||
Nestlé transaction related costs | 12.1 | — | |||||||
Sale of Tazo brand | 0.4 | — | |||||||
Non-GAAP operating income | $ | 1,169.9 | $ | 1,178.4 | (0.7)% | ||||
Operating margin, as reported (GAAP) | 16.5 | % | 18.4 | % | (190) bps | ||||
Restructuring, impairment and optimization costs (1) | 0.3 | 2.1 | |||||||
CAP transaction and integration-related items (2) | 1.2 | 0.3 | |||||||
2018 U.S. stock award (3) | 0.3 | — | |||||||
Nestlé transaction related costs | 0.2 | — | |||||||
Sale of Tazo brand | — | — | |||||||
Non-GAAP operating margin | 18.5 | % | 20.8 | % | (230) bps | ||||
Diluted net earnings per share, as reported (GAAP) | $ | 0.61 | $ | 0.47 | 29.8% | ||||
East China acquisition gain | — | — | |||||||
Sale of Tazo brand | — | — | |||||||
Restructuring, impairment and optimization costs (1) | 0.02 | 0.08 | |||||||
CAP transaction and integration-related items (2) | 0.05 | 0.01 | |||||||
2018 U.S. stock award (3) | 0.02 | — | |||||||
Nestlé transaction related costs | 0.01 | — | |||||||
Other tax matters (4) | (0.01 | ) | — | ||||||
Income tax effect on Non-GAAP adjustments (5) | (0.08 | ) | (0.02 | ) | |||||
Non-GAAP net earnings per share | $ | 0.62 | $ | 0.55 | 12.7% |
(1) | Represents costs associated with our restructuring efforts, primarily asset impairments related to certain company-operated store closures in the U.S., as well as business process optimization costs, largely consulting fees in FY18. FY17 represents goodwill and other asset impairment charges associated with our Teavana-branded stores and goodwill impairment related to our Switzerland retail business. |
(2) | Includes transaction costs for the acquisition of our East China joint venture and the divestiture of our Taiwan joint venture; ongoing amortization expense of acquired intangible assets associated with the acquisition of East China and Starbucks Japan; and the related post-acquisition integration costs, such as incremental information technology and compensation-related costs. |
(3) | Represents incremental stock-based compensation award for U.S. partners (employees). |
(4) | Represents the estimated impact of the U.S. Tax Cuts and Jobs Act, specifically the transition tax on undistributed foreign earnings 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) | $3.26 - $3.28 | $1.97 | 65% - 66% | |||||
East China acquisition gain | (0.99 | ) | — | |||||
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 | ||||||
2018 U.S. stock award (4) | 0.03 | — | ||||||
Nestlé transaction related costs | 0.01 | — | ||||||
Other tax matters (3) | 0.12 | — | ||||||
Income tax effect on Non-GAAP adjustments (5) | — | (0.04 | ) | |||||
Non-GAAP net earnings per share | $2.40 - $2.42 | $2.06 | 17% |
(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 (employees). |
(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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