Market Overview

Starbucks Reports Q4 and Full Year Fiscal 2017 Results

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Q4 GAAP Earnings Per Share of $0.54; Non-GAAP Earnings Per Share
Increases to $0.55

Q4 Global and U.S. Comps Up 2%, Up 3% adjusted for Hurricane Impact;
China Up 8%; Global Traffic Up 1%

Board Approves 20% Increase in Quarterly Dividend, to $0.30 Per Share

Company Commits to Returning $15 Billion to Shareholders Over Next 3
Years; Updates Long Term Financial Targets

Starbucks Corporation (NASDAQ:SBUX) today reported financial results
for its 13-week fiscal fourth quarter and 52-week fiscal year ended
October 1, 2017. Note that fiscal 2016 contained an extra week in the
fourth quarter, resulting in incremental revenue and income in the
comparable periods, which had 14- and 53-weeks, respectively. Further,
GAAP results in fiscal 2017 include items related to strategic actions
the company is taking as it focuses on accelerating growth in
high-returning businesses and streamlining its operations. These items
include restructuring and impairment charges, transaction and
integration costs, gains related to changes in ownership of
international markets, and other items, which are excluded from non-GAAP
results. A reconciliation of non-GAAP measures with their corresponding
GAAP measures is available at the end of this release.

The company will hold a conference call, hosted by Kevin Johnson,
president and ceo, and Scott Maw, cfo, today at 2:00 p.m. Pacific Time,
in order to provide further commentary around Starbucks non-GAAP
business results. The call will be webcast and can be accessed at http://investor.starbucks.com.

Q4 Fiscal 2017 Highlights

  • Global comparable store sales increased 2%, driven by a 2%
    increase in average ticket and a 1% increase in transactions; up 3%
    excluding the impact from Hurricanes Harvey and Irma
    • Americas comp store sales increased 3%, driven by a 2%
      increase in average ticket and a 1% increase in transactions
    • U.S. comp store sales increased 2%; excluding the impact from
      Hurricanes Harvey and Irma, U.S. comp sales up 3%, driven by a 1%
      increase in transactions
    • CAP comp store sales increased 2%; China comp store sales
      increased 8%, driven by a 7% increase in transactions
  • Consolidated net revenues of $5.7 billion versus $5.7 billion in the
    prior year quarter. Excluding $412.4 million for the extra week in Q4
    FY16, consolidated net revenues grew 8%
  • GAAP operating income of $1.0 billion declined 16.7% compared to the
    prior year quarter. Non-GAAP operating income grew 2.8% to $1.1 billion
  • GAAP operating margin of 17.9% declined 360 basis points compared to
    the prior year quarter. Non-GAAP operating margin of 20.0% declined 90
    basis points primarily due to increased investments in our store
    partners
  • GAAP Earnings Per Share of $0.54 was flat to the prior year quarter.
    Non-GAAP EPS grew 10.0% to $0.55 per share
  • The company opened 603 net new stores globally, bringing total store
    count to 27,339 across 75 countries
  • Membership in Starbucks Rewards grew 11% year-over-year to 13.3
    million active members in the U.S., with member spend representing 36%
    of U.S. company-operated sales
  • Mobile Order and Pay reached 10% of transactions in U.S.
    company-operated stores

Fiscal Year 2017 Highlights

  • Global comparable store sales increased 3%, comprised of a 3%
    increase in the Americas segment and a 3% increase in the CAP
    segment
    • U.S. comp store sales increased 3%; China comp store sales
      increased 7%, driven by a 5% increase in transactions
  • Consolidated net revenues of $22.4 billion grew 5% versus the prior
    year. Excluding $412.4 million for the extra week in Q4 FY16,
    consolidated net revenues grew 7% year over year
  • GAAP operating income of $4.1 billion declined 0.9% compared to the
    prior year. Non-GAAP operating income grew 7.8% to $4.4 billion
  • GAAP operating margin of 18.5% declined 110 basis points compared to
    the prior year. Non-GAAP operating margin expanded 10 basis points to
    19.7%
  • GAAP Earnings Per Share of $1.97 grew 3.7% versus the prior year.
    Non-GAAP EPS grew 11.4% to $2.06 per share

"Today, Starbucks reported another quarter – and year – of strong
performance, with each of our business segments around the world
contributing to record results," said Kevin Johnson, ceo and president.
"Food, beverage and digital innovation are bringing customers into our
stores at the same time as ongoing operational improvements are enabling
us to drive increased throughput - particularly in our busiest stores at
peak - and deliver a further elevated Starbucks Experience to our
customers."

"Starbucks delivered solid top and bottom line growth – and our
strongest quarterly traffic number in the U.S. since mid-2016 – despite
a difficult operating environment in both the quarter and year," said
Scott Maw, cfo. "Continued strong growth and performance from CAP
demonstrates that Starbucks now has two significant profit engines
driving our global returns, our North America business and the broader
CAP market."

Long Term Financial Targets

The company provides the following updates to long term financial
targets; more detail will be provided during its Q4 FY17 earnings
conference call today at 2:00 p.m. Pacific Time. Following the call,
these items can be accessed on the company's Investor Relations website.

  • Annual global comparable store sales growth of 3% to 5%
  • Annual consolidated net revenue growth in the high single digits
  • Annual earnings per share growth of 12% or greater
  • Annual ROIC of 25% or greater

Fiscal Year 2018 Financial Targets

The company will introduce fiscal year 2018 financial targets during its
Q4 FY17 earnings conference call starting today at 2:00 p.m. Pacific
Time. These items can be accessed on the company's Investor Relations
website during and after the call.

     

Fourth Quarter Fiscal 2017 Summary

 
Quarter Ended Oct 1, 2017
Comparable Store Sales(1)       Sales Growth     Change in Transactions     Change in Ticket
Consolidated 2%     1%     2%
Americas 3% 1% 2%
CAP 2% 1% 1%
EMEA(2)       1%     (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. For fiscal 2016,
comparable store sales percentages were calculated excluding the 53rd
week.
(2) Company-operated stores represent 17% of the EMEA
segment store portfolio as of October 1, 2017.
 
             
Operating Results Quarter Ended     Change
Oct 1, 2017     Oct 2, 2016
($ in millions, except per share amounts)       (13 Weeks Ended)     (14 Weeks Ended)    
Net New Stores (1) 603 690 (87)
Revenues $5,698.3 $5,711.2 0%
Operating Income $1,022.5 $1,227.5 (17)%
Operating Margin 17.9% 21.5% (360) bps
EPS       $0.54     $0.54     0%
(1) Q4 2017 net new stores include the closure of 54
Teavana-branded stores.
 

Consolidated net revenues of $5.7 billion in Q4 FY17 were flat to the
prior year quarter, which included an extra week. Excluding $412.4
million for the extra week in Q4 FY16, consolidated net revenues grew
8%, driven by incremental revenues from the opening of 2,254 net new
stores over the past 12 months and a 2% growth in global comparable
store sales. The impact from Hurricanes Irma and Harvey affected
consolidated and U.S. comp growth by 1% as over 1,000 stores were
temporarily closed for storm related reasons.

Consolidated operating income declined 17% to $1,022.5 million in Q4
FY17, down from $1,227.5 million in Q4 FY16. Consolidated operating
margin declined 360 basis points to 17.9%, primarily due to increased
partner investments, largely in the Americas segment, and the lapping of
the 53rd week in Q4 FY16. Additionally, operating margin was adversely
impacted by product mix shift, largely towards food, a higher donation
to The Starbucks Foundation, and costs related to restructuring and
impairments. These were partially offset by sales leverage.

             

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