Q3 Consolidated Net Revenues of $4.2 Billion,
Down 38% from Prior Year Due to Adverse Impact of COVID-19 Q3 GAAP
EPS of -$0.58; Non-GAAP EPS of -$0.46 Reflecting Material Sales
Deleverage and Retail Partner Support COVID-19 Impacts Expected to
Moderate Meaningfully in Q4 as Recovery Continues
Starbucks Corporation (NASDAQ: SBUX) today reported financial
results for its 13-week fiscal third quarter ended June 28, 2020.
GAAP results in fiscal 2020 and fiscal 2019 include items that are
excluded from non-GAAP results. Please refer to the reconciliation
of GAAP measures to non-GAAP measures at the end of this release
for more information.
“Since the beginning of the COVID-19 outbreak in January, we
have taken a principled approach to navigate the crisis, true to
our mission and values. Every step of the way, we have thoughtfully
addressed the needs of Starbucks stakeholders and are particularly
proud of the industry-leading investments we have made to support
our partners while creating a safe, familiar and convenient
experience for our customers. Starbucks partners have risen to the
occasion, and our near-term focus is to recover sales safely and
responsibly by offering our customers the comfort and care that
differentiate the Starbucks Experience,” said Kevin Johnson,
president and ceo.
“We are pleased to share that the vast majority of Starbucks
stores around the world have reopened and our global business is
steadily recovering, demonstrating the relevance of the Starbucks
brand and the trust we have built with our customers. As we
continue to drive the recovery, we are also building resilience for
the future by accelerating the transformation of our business in
ways that will elevate the customer and partner experience and
drive long-term growth. We firmly believe that we are well
positioned to regain the positive business momentum we had before
the pandemic began and look forward to reigniting our 'Growth at
Scale' agenda,” concluded Johnson.
Q3 Fiscal 2020
Highlights
- Global comparable store sales declined 40%, driven by a 51%
decrease in comparable transactions, partially offset by a 23%
increase in average ticket
- Americas comparable store sales declined 41%, driven by a 53%
decrease in comparable transactions, partially offset by a 27%
increase in average ticket; U.S. comparable store sales were down
40%, with comparable transactions down 52%, partially offset by a
25% increase in average ticket
- International comparable store sales were down 37%, driven by a
44% decline in comparable transactions, slightly offset by a 13%
increase in average ticket; China comparable store sales were down
19%, with comparable transactions down 27%, slightly offset by a
10% increase in average ticket; International and China comparable
store sales are inclusive of a benefit from value-added tax
exemptions of approximately 2% and 4%, respectively
- The company opened 130 net new stores in Q3, yielding 5%
year-over-year unit growth, ending the period with 32,180 stores
globally, of which 51% and 49% were company-operated and licensed,
respectively
- Stores in the U.S. and China comprised 61% of the company’s
global portfolio at the end of Q3, with 15,243 and 4,447 stores,
respectively
- Consolidated net revenues of $4.2 billion declined 38% from the
prior year primarily due to lost sales related to the COVID-19
outbreak
- Lost sales of approximately $3.1 billion relative to the
company’s expectations before the outbreak included the effects of
temporary store closures, modified operations, reduced hours and
reduced customer traffic(1)
- GAAP operating margin of -16.7%, down from 16.4% in the prior
year primarily due to the COVID-19 outbreak, mainly sales
deleverage, material investments in retail partner support and
other items; GAAP operating margin was also adversely impacted by
restructuring activities primarily associated with the U.S. store
portfolio optimization
- Non-GAAP operating margin of -12.6%, down from 18.3% in the
prior year
- GAAP loss per share of $0.58, down from earnings per share of
$1.12 in the prior year primarily due to unfavorable impacts
related to the COVID-19 outbreak totaling approximately -$1.20 per
share(1)(2)
- Non-GAAP loss per share of $0.46, down from earnings per share
of $0.78 in the prior year
- Starbucks® Rewards loyalty program 90-day active members in the
U.S. declined to 16.3 million, down 5% year-over-year due to
reduced customer frequency primarily attributable to temporary
store closures and other impacts related to the COVID-19
outbreak
(1)
In this release, we estimate the
impact of COVID-19 by comparing actual results to our previous
forecasts. These forecasts were created prior to the spread of the
virus and were based on information available at the time and on a
variety of assumptions which we believe were reasonable, some or
all of which may prove not to be accurate.
(2)
In this release, the EPS impact
of COVID-19 represents an approximation based on the estimated
impact of the pandemic on operating results. It does not
incorporate any impacts of COVID-19 on non-operating items, such as
interest income, interest expense, income taxes and outstanding
shares.
Q3 Americas Segment
Results
Quarter Ended
Change (%)
($ in millions)
Jun 28, 2020
Jun 30, 2019
Comparable Store Sales Growth (1)
(41)%
7%
Change in Transactions
(53)%
3%
Change in Ticket
27%
4%
Store Count
18,235
17,853
2%
Revenues
$2,805.5
$4,681.1
(40)%
Operating Income/(Loss)
($404.9)
$1,018.7
(140)%
Operating Margin
(14.4)%
21.8%
(3,620) bps
(1)
Includes only Starbucks® company-operated
stores open 13 months or longer. Comparable store sales exclude the
effects of fluctuations in foreign currency exchange rates and
Siren Retail stores. Stores that are temporarily closed or
operating at reduced hours due to the COVID-19 outbreak remain in
comparable store sales while stores identified for permanent
closure have been removed.
Net revenues for the Americas segment of $2.8 billion in Q3 FY20
were 40% lower relative to Q3 FY19, primarily due to a 41% decrease
in comparable store sales as well as lower product sales to and
royalty revenues from our licensees as a result of lost sales
related to the COVID-19 outbreak. These decreases were slightly
offset by 382 net new store openings, or 2% store growth, over the
past 12 months.
The Americas segment reported an operating loss of $404.9
million in Q3 FY20, compared to operating income of $1.0 billion in
Q3 FY19. Operating margin of -14.4% contracted 3,620 basis points,
primarily due to the impact of the COVID-19 outbreak, mainly sales
deleverage and additional costs incurred, including catastrophe
wages, enhanced pay programs and benefits in support of retail
store partners as well as store safety items, partially offset by
temporary government subsidies. Higher expenses relating to our
U.S. store portfolio optimization also contributed to the operating
loss in the quarter.
Q3 International Segment
Results
Quarter Ended
Change (%)
($ in millions)
Jun 28, 2020
Jun 30, 2019
Comparable Store Sales Growth (1)
(37)%
5%
Change in Transactions
(44)%
1%
Change in Ticket
13%
3%
Store Count
13,945
12,773
9%
Revenues
$949.6
$1,585.3
(40)%
Operating Income/(Loss)
($86.0)
$270.2
(132)%
Operating Margin
(9.1)%
17.0%
(2,610) bps
(1)
Includes only Starbucks® company-operated
stores open 13 months or longer. Comparable store sales exclude the
effects of fluctuations in foreign currency exchange rates and
Siren Retail stores. Stores that are temporarily closed or
operating at reduced hours due to the COVID-19 outbreak remain in
comparable store sales while stores identified for permanent
closure have been removed. Comparable store sales include a 2%
benefit related to a temporary value-added tax exemption in
China.
Net revenues for the International segment of $949.6 million in
Q3 FY20 were 40% lower relative to Q3 FY19, primarily due to a 37%
decrease in comparable store sales as well as lower product sales
to our international licensees as a result of lost sales related to
the COVID-19 outbreak and temporary royalty relief granted to
international licensees. Also contributing to the decrease was the
2% revenue-dilutive impact of converting Thailand to a fully
licensed market in FY19. These decreases were partially offset by
1,172 net new store openings, or 9% store growth, over the past 12
months.
The International segment reported an operating loss of $86.0
million in Q3 FY20 compared to operating income of $270.2 million
in Q3 FY19. Operating margin contracted 2,610 basis points to
-9.1%, primarily due to the impact of the COVID-19 outbreak, mainly
sales deleverage, royalty relief granted to international licensees
and additional costs incurred including catastrophe wages,
partially offset by temporary government subsidies and rent
concessions.
Q3 Channel Development Segment
Results
Quarter Ended
Change (%)
($ in millions)
Jun 28, 2020
Jun 30, 2019
Revenues
$447.3
$533.3
(16)%
Operating Income
$124.2
$181.9
(32)%
Operating Margin
27.8%
34.1%
(630) bps
Net revenues for the Channel Development segment of $447.3
million in Q3 FY20 were 16% lower relative to Q3 FY19, primarily
driven by an approximately 21% unfavorable impact of Global Coffee
Alliance transition-related activities, inclusive of lapping higher
inventory sales in the prior year as Nestlé prepared to fulfill
customer orders. Given Channel Development’s at-home coffee
offerings in grocery stores, at mass merchants and online, the
COVID-19 outbreak did not materially disrupt the segment's overall
revenue in Q3 FY20.
Operating income decreased 32% to $124.2 million in Q3 FY20,
down from $181.9 million in Q3 FY19. Operating margin contracted
630 basis points to 27.8%, primarily driven by certain transition
items related to the Global Coffee Alliance, partially offset by a
business mix shift as we lapped higher inventory sales in the prior
year as Nestlé prepared to fulfill customer orders.
Global Store Status
Since the peak of widespread store closures in response to the
COVID-19 outbreak across our global markets in April, the vast
majority of Starbucks company-operated stores in both the Americas
and International segments had reopened by the end of Q3 FY20, most
with modified store hours and limited seating. Today, approximately
97% of our global company-operated store portfolio is open, led by
96% in the U.S. and 99% in China, as well as 99% in Japan and 97%
in Canada. Currently, approximately 87% of our global licensed
store portfolio is open, with remaining temporary closures
predominantly in airport, college and university locations within
the U.S. and Canadian licensed store portfolios.
Fiscal 2020 Guidance
The company provides the following fiscal 2020 guidance for Q4
and the full year, including updates to certain targets previously
discussed in its Form 8-K dated June 10, 2020. The company
continues to expect the adverse impacts of the COVID-19 outbreak to
moderate meaningfully in Q4 FY20.
• Global comparable store sales declines
of 12% to 17% for each of Q4 and full year
• Americas and U.S. comparable store sales
declines of 12% to 17% for each of Q4 and full year
▪ (previously declines of 10% to 20% for
each of Q4 and full year)
• International comparable store sales
declines of 10% to 15% for Q4 and 20% to 25% for full year
inclusive of a benefit from value-added tax exemption of
approximately 3% and 1%, respectively
▪ (previously declines of 10% to 20% for
Q4 and 20% to 30% for full year)
◦ China comparable store sales roughly
flat to -5% for Q4 and a decline of 15% to 20% for full year,
inclusive of a benefit from value-added tax exemption of
approximately 4% and 2%, respectively
▪ (previously roughly flat by the end of
Q4 and a decline of 10% to 20% for full year)
• Americas approximately 300 net new
stores
• China at least 500 net new stores
• Consolidated revenue decline of 10% to
15% for Q4
◦ Channel Development revenue decline of
5% to 6% for full year
• Interest expense of approximately $435
million to $445 million
• GAAP and non-GAAP effective tax rates in
the range of mid- to high-20%s
• GAAP EPS in the range of $0.06 to $0.21
for Q4 and $0.50 to $0.65 for full year
▪ (previously $0.11 to $0.36 for Q4 and
$0.33 to $0.73 for full year)
◦ Non-GAAP EPS in the range of $0.18 to
$0.33 for Q4 and $0.83 to $0.98 for full year
▪ (previously $0.15 to $0.40 for Q4 and
$0.55 to $0.95 for full year)
• Capital expenditures of approximately
$1.5 billion
All guidance for the metrics noted above is for Q4 FY20 and
fiscal year 2020, and growth metrics are relative to Q4 FY19 and
fiscal year 2019. Please note, the guidance provided above is
dependent on our current expectations which may be impacted by
evolving, external conditions and local safety guidelines.
Please refer to the reconciliation of GAAP measures to non-GAAP
measures at the end of this release.
The company will provide additional information regarding its
business outlook during its regularly scheduled quarterly earnings
conference call today; this information will also be available
following the call on the company’s website at http://investor.starbucks.com.
Company Updates
- Beginning in May, the company outlined that it would accelerate
the transformation of the Americas store portfolio by expanding
convenience-led formats with curbside delivery and Starbucks®
Pickup locations. The company plans to launch curbside pickup in
several hundred existing locations in the near future and add over
50 Starbucks Pickup locations in the next 12 to 18 months. Both
formats naturally allow for mobile ordering and physical distancing
to meet evolving customer preferences that have accelerated because
of COVID-19.
- In May, the company executed a $3 billion bond issuance, taking
advantage of the favorable interest rate environment to secure
additional liquidity to cover medium-term operating cash needs
while also prefunding fiscal 2021 bond maturities.
- In June, the company announced the U.S. launch of the
Impossible™ Breakfast Sandwich featuring a plant-based sausage
patty. This new menu offering joins its plant-based milk
alternatives. As part of the company’s aspiration to be
resource-positive and to meet increasing customer demand, Starbucks
will continue to introduce plant-based choices as it expands its
environmentally friendly menu.
- In July, the company announced plans to update its
industry-leading Starbucks® Rewards loyalty program by giving
members more payment options and ways to earn Stars through the
Starbucks app. Beginning this fall in company-operated stores in
the U.S. and Canada, new and current Starbucks Rewards members will
be able to pay with cash, credit/debit cards or select mobile
wallets and earn Stars toward free items, without having to preload
a Starbucks card within the app.
- The Board of Directors declared a cash dividend of $0.41 per
share, payable on August 21, 2020, to shareholders of record as of
August 7, 2020.
Conference Call
Starbucks will hold a conference call today at 2:00 p.m. Pacific
Time, which will be hosted by Kevin Johnson, president and ceo, and
Patrick Grismer, cfo. The call will be webcast and can be accessed
at http://investor.starbucks.com. A
replay of the webcast will be available until end of day Friday,
August 28, 2020.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to
ethically sourcing and roasting high-quality arabica coffee. Today,
with more than 32,000 stores around the globe, the company is the
premier roaster and retailer of specialty coffee in the world.
Through our unwavering commitment to excellence and our guiding
principles, we bring the unique Starbucks Experience to life for
every customer through every cup. To share in the experience,
please visit us in our stores or online at stories.starbucks.com or
www.starbucks.com.
Forward-Looking
Statements
Certain statements contained herein and in our investor
conference call related to these results are “forward-looking”
statements within the meaning of the applicable securities laws and
regulations. Generally, these statements can be identified by the
use of words such as “anticipate,” “believe,” “continue,” “could,”
“estimate,” “expect,” “forecast,” “intend,” “may,” “outlook,”
“plan,” “potential,” “predict,” “project,” “remain,” “should,”
“will,” “would,” and similar expressions intended to identify
forward-looking statements, although not all forward-looking
statements contain these identifying words. These statements
include statements relating to: the estimated financial impact
related to the outbreak of coronavirus disease (COVID-19) including
the outlook, guidance and projections for revenues, earnings per
share, operating income, operating margins, comparable store sales,
net new stores, capital expenditures, interest expense, quarterly
and fiscal 2020 guidance; the nature and extent of the impact of
COVID-19 on our business, operations and financial results; the
anticipated timing and effects of recovery of our business; our
plans for streamlining our operations, including store openings,
closures and changes in store formats and models; our ability to
continue steady business improvement and improve customer and
partner experiences; and our ability to emerge from this global
crisis and drive long-term growth. These forward-looking statements
do not represent historical data, are based on currently available
operating, financial and competitive information and are subject to
a number of significant risks and uncertainties. Actual future
results and trends may differ materially depending on a variety of
factors, including, but not limited to: further spread of COVID-19;
regulatory measures or voluntary actions that may be put in place
to limit the spread of COVID-19, including restrictions on business
operations or social distancing requirements, and the duration and
efficacy of such restrictions; the potential for a resurgence of
COVID-19 infections in a given geographic region after it has hit
its “peak”; fluctuations in U.S. and international economies and
currencies; our ability to preserve, grow and leverage our brands;
the ability of our business partners and third-party providers to
fulfill their responsibilities and commitments; potential negative
effects of incidents involving food or beverage-borne illnesses,
tampering, adulteration, contamination or mislabeling; potential
negative effects of material breaches of our information technology
systems to the extent we experience a material breach; material
failures of our information technology systems; costs associated
with, and the successful execution of, the company’s initiatives
and plans, including the integration of the East China business and
the successful expansion of our Global Coffee Alliance with Nestlé;
our ability to obtain financing on acceptable terms; the acceptance
of the company’s products by our customers, evolving consumer
preferences and tastes and the availability of consumer financing;
changes in the availability and cost of labor; the impact of
competition; inherent risks of operating a global business; the
prices and availability of coffee, dairy and other raw materials;
the effect of legal proceedings; and the effects of changes in tax
laws and related guidance and regulations that may be implemented
and other risks detailed in the company filings with the Securities
and Exchange Commission, including the “Risk Factors” sections of
Starbucks Annual Report on Form 10-K for the fiscal year ended
September 29, 2019 and Starbucks Quarterly Report on Form 10-Q for
the fiscal quarter ended March 29, 2020. The company assumes no
obligation to update any of these forward-looking statements.
Non-GAAP Financial
Measures
Certain non-GAAP measures included in our press release and in
our investor conference call related to these results were not
reconciled to the comparable GAAP financial measures because the
GAAP measures are not accessible on a forward-looking basis. The
company is unable to reconcile these forward-looking non-GAAP
financial measures to the most directly comparable GAAP measures
without unreasonable efforts because the company is currently
unable to predict with a reasonable degree of certainty the type
and extent of certain items that would be expected to impact GAAP
measures for these periods but would not impact the non-GAAP
measures. Such items may include acquisitions, divestitures,
restructuring and other items. The unavailable information could
have a significant impact on the company’s GAAP financial
results.
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF
EARNINGS
(unaudited, in millions, except
per share data)
Quarter Ended
Quarter Ended
Jun 28, 2020
Jun 30, 2019
%
Change
Jun 28, 2020
Jun 30, 2019
As a % of total net
revenues
Net revenues:
Company-operated stores
$
3,444.4
$
5,535.0
(37.8)
%
81.6
%
81.1
%
Licensed stores
300.5
725.0
(58.6)
7.1
10.6
Other
477.2
563.0
(15.2)
11.3
8.3
Total net revenues
4,222.1
6,823.0
(38.1)
100.0
100.0
Product and distribution costs(1)
1,484.0
2,199.6
(32.5)
35.1
32.2
Store operating expenses
2,537.8
2,643.2
(4.0)
60.1
38.7
Other operating expenses
133.6
94.4
41.5
3.2
1.4
Depreciation and amortization expenses
361.0
343.1
5.2
8.6
5.0
General and administrative expenses
399.9
459.7
(13.0)
9.5
6.7
Restructuring and impairments
78.1
37.7
107.2
1.8
0.6
Total operating expenses
4,994.4
5,777.7
(13.6)
118.3
84.7
Income from equity investees
68.4
76.0
(10.0)
1.6
1.1
Operating income/(loss)
(703.9)
1,121.3
(162.8)
(16.7)
16.4
Net gain resulting from divestiture of
certain operations
—
601.8
nm
—
8.8
Interest income and other, net
12.7
40.2
(68.4)
0.3
0.6
Interest expense
(120.8)
(86.4)
39.8
(2.9)
(1.3)
Earnings/(loss) before income taxes
(812.0)
1,676.9
(148.4)
(19.2)
24.6
Income tax expense/(benefit)
(133.9)
303.7
nm
(3.2)
4.5
Net earnings/(loss) including
noncontrolling interests
(678.1)
1,373.2
(149.4)
(16.1)
20.1
Net earnings/(loss) attributable to
noncontrolling interests
0.3
0.4
(25.0)
—
—
Net earnings/(loss) attributable to
Starbucks
$
(678.4)
$
1,372.8
(149.4)
(16.1)
%
20.1
%
Net earnings/(loss) per common share -
diluted
$
(0.58)
$
1.12
(151.8)
%
Weighted avg. shares outstanding -
diluted
1,168.5
1,223.0
Cash dividends declared per share
$
0.41
$
0.36
Supplemental Ratios:
Store operating expenses as a % of
company-operated store revenues
73.7
%
47.8
%
Effective tax rate including
noncontrolling interests
16.5
%
18.1
%
(1)
The caption "Product and distribution
costs" replaced "Cost of sales" in financial statements published
in periods prior to our third quarter of fiscal 2020. Besides the
name change, there were no other changes in the types of costs
reported within the caption.
Three Quarters Ended
Three Quarters Ended
Jun 28, 2020
Jun 30, 2019
%
Change
Jun 28, 2020
Jun 30, 2019
As a % of total net
revenues
Net revenues:
Company-operated stores
$
13,991.0
$
16,064.3
(12.9)
%
80.8
%
81.3
%
Licensed stores
1,782.4
2,140.3
(16.7)
10.3
10.8
Other
1,541.5
1,557.0
(1.0)
8.9
7.9
Total net revenues
17,314.9
19,761.6
(12.4)
100.0
100.0
Product and distribution costs
5,718.2
6,387.4
(10.5)
33.0
32.3
Store operating expenses
8,080.7
7,784.2
3.8
46.7
39.4
Other operating expenses
330.3
279.4
18.2
1.9
1.4
Depreciation and amortization expenses
1,068.3
1,032.5
3.5
6.2
5.2
General and administrative expenses
1,240.6
1,365.7
(9.2)
7.2
6.9
Restructuring and impairments
83.7
123.9
(32.4)
0.5
0.6
Total operating expenses
16,521.8
16,973.1
(2.7)
95.4
85.9
Income from equity investees
210.3
206.1
2.0
1.2
1.0
Operating income
1,003.4
2,994.6
(66.5)
5.8
15.2
Net gain resulting from divestiture of
certain operations
—
622.8
nm
—
3.2
Interest income and other, net
30.7
80.2
(61.7)
0.2
0.4
Interest expense
(312.1)
(235.3)
32.6
(1.8)
(1.2)
Earnings before income taxes
722.0
3,462.3
(79.1)
4.2
17.5
Income tax expense
190.0
670.1
(71.6)
1.1
3.4
Net earnings including noncontrolling
interests
532.0
2,792.2
(80.9)
3.1
14.1
Net loss attributable to noncontrolling
interests
(3.7)
(4.2)
(11.9)
—
—
Net earnings attributable to
Starbucks
$
535.7
$
2,796.4
(80.8)
3.1
%
14.2
%
Net earnings per common share -
diluted
$
0.45
$
2.25
(80.0)
%
Weighted avg. shares outstanding -
diluted
1,182.7
1,242.4
Cash dividends declared per share
$
1.23
$
1.08
Supplemental Ratios:
Store operating expenses as a % of
company-operated store revenues
57.8
%
48.5
%
Effective tax rate including
noncontrolling interests
26.3
%
19.4
%
Segment Results (in
millions)
Americas
Jun 28, 2020
Jun 30, 2019
%
Change
Jun 28, 2020
Jun 30, 2019
Quarter
Ended
As a % of Americas
total net revenues
Net revenues:
Company-operated stores
$
2,568.9
$
4,182.2
(38.6)
%
91.6
%
89.3
%
Licensed stores
235.5
496.3
(52.5)
8.4
10.6
Other
1.1
2.6
(57.7)
—
0.1
Total net revenues
2,805.5
4,681.1
(40.1)
100.0
100.0
Product and distribution costs
805.6
1,324.0
(39.2)
28.7
28.3
Store operating expenses
2,054.4
2,034.0
1.0
73.2
43.5
Other operating expenses
40.7
41.7
(2.4)
1.5
0.9
Depreciation and amortization expenses
191.3
175.6
8.9
6.8
3.8
General and administrative expenses
62.2
72.0
(13.6)
2.2
1.5
Restructuring and impairments
56.2
15.1
272.2
2.0
0.3
Total operating expenses
3,210.4
3,662.4
(12.3)
114.4
78.2
Operating income/(loss)
$
(404.9)
$
1,018.7
(139.7)
%
(14.4)
%
21.8
%
Supplemental Ratio:
Store operating expenses as a % of
company-operated store revenues
80.0
%
48.6
%
Three Quarters
Ended
Net revenues:
Company-operated stores
$
10,903.5
$
12,124.0
(10.1)
%
89.8
%
89.1
%
Licensed stores
1,237.0
1,474.0
(16.1)
10.2
10.8
Other
5.8
9.6
(39.6)
—
0.1
Total net revenues
12,146.3
13,607.6
(10.7)
100.0
100.0
Product and distribution costs
3,442.2
3,895.8
(11.6)
28.3
28.6
Store operating expenses
6,427.3
5,952.8
8.0
52.9
43.7
Other operating expenses
125.1
125.6
(0.4)
1.0
0.9
Depreciation and amortization expenses
571.9
515.5
10.9
4.7
3.8
General and administrative expenses
202.8
217.9
(6.9)
1.7
1.6
Restructuring and impairments
61.9
56.2
10.1
0.5
0.4
Total operating expenses
10,831.2
10,763.8
0.6
89.2
79.1
Operating income
$
1,315.1
$
2,843.8
(53.8)
%
10.8
%
20.9
%
Supplemental Ratio:
Store operating expenses as a % of
company-operated store revenues
58.9
%
49.1
%
International
Jun 28, 2020
Jun 30, 2019
%
Change
Jun 28, 2020
Jun 30, 2019
Quarter
Ended
As a % of
International
total net revenues
Net revenues:
Company-operated stores
$
875.5
$
1,352.8
(35.3)
%
92.2
%
85.3
%
Licensed stores
65.0
228.7
(71.6)
6.8
14.4
Other
9.1
3.8
139.5
1.0
0.2
Total net revenues
949.6
1,585.3
(40.1)
100.0
100.0
Product and distribution costs
337.7
476.1
(29.1)
35.6
30.0
Store operating expenses
483.4
609.2
(20.7)
50.9
38.4
Other operating expenses
37.5
26.7
40.4
3.9
1.7
Depreciation and amortization expenses
128.5
127.7
0.6
13.5
8.1
General and administrative expenses
66.1
86.0
(23.1)
7.0
5.4
Restructuring and impairments
(0.2)
16.6
nm
—
1.0
Total operating expenses
1,053.0
1,342.3
(21.6)
110.9
84.7
Income from equity investees
17.4
27.2
(36.0)
1.8
1.7
Operating income/(loss)
$
(86.0)
$
270.2
(131.8)
%
(9.1)
%
17.0
%
Supplemental Ratio:
Store operating expenses as a % of
company-operated store revenues
55.2
%
45.0
%
Three Quarters
Ended
Net revenues:
Company-operated stores
$
3,087.5
$
3,940.3
(21.6)
%
84.5
%
85.3
%
Licensed stores
545.4
666.3
(18.1)
14.9
14.4
Other
22.4
12.0
86.7
0.6
0.3
Total net revenues
3,655.3
4,618.6
(20.9)
100.0
100.0
Product and distribution costs
1,213.9
1,408.9
(13.8)
33.2
30.5
Store operating expenses
1,653.4
1,831.4
(9.7)
45.2
39.7
Other operating expenses
105.1
84.5
24.4
2.9
1.8
Depreciation and amortization expenses
385.2
385.0
0.1
10.5
8.3
General and administrative expenses
196.9
235.5
(16.4)
5.4
5.1
Restructuring and impairments
(0.6)
47.2
nm
—
1.0
Total operating expenses
3,553.9
3,992.5
(11.0)
97.2
86.4
Income from equity investees
73.1
75.7
(3.4)
2.0
1.6
Operating income
$
174.5
$
701.8
(75.1)
%
4.8
%
15.2
%
Supplemental Ratio:
Store operating expenses as a % of
company-operated store revenues
53.6
%
46.5
%
Channel Development
Jun 28, 2020
Jun 30, 2019
%
Change
Jun 28, 2020
Jun 30, 2019
Quarter
Ended
As a % of Channel
Development net revenues
Net revenues
$
447.3
$
533.3
(16.1)
%
Product and distribution costs
319.9
377.1
(15.2)
71.5
%
70.7
%
Other operating expenses
51.4
20.2
154.5
11.5
3.8
Depreciation and amortization expenses
0.3
0.2
50.0
0.1
—
General and administrative expenses
2.5
2.7
(7.4)
0.6
0.5
Total operating expenses
374.1
400.2
(6.5)
83.6
75.0
Income from equity investees
51.0
48.8
4.5
11.4
9.2
Operating income
$
124.2
$
181.9
(31.7)
%
27.8
%
34.1
%
Three Quarters
Ended
Net revenues
$
1,461.0
$
1,484.5
(1.6)
%
Product and distribution costs
1,010.3
1,030.9
(2.0)
69.2
%
69.4
%
Other operating expenses
89.7
55.9
60.5
6.1
3.8
Depreciation and amortization expenses
0.9
12.6
(92.9)
0.1
0.8
General and administrative expenses
8.0
8.9
(10.1)
0.5
0.6
Total operating expenses
1,108.9
1,108.3
0.1
75.9
74.7
Income from equity investees
137.2
130.4
5.2
9.4
8.8
Operating income
$
489.3
$
506.6
(3.4)
%
33.5
%
34.1
%
Corporate and Other
Jun 28, 2020
Jun 30, 2019
% Change
Quarter
Ended
Net revenues
$
19.7
$
23.3
(15.5)
%
Product and distribution costs
20.8
22.4
(7.1)
Other operating expenses
4.0
5.8
(31.0)
Depreciation and amortization expenses
40.9
39.6
3.3
General and administrative expenses
269.1
299.0
(10.0)
Restructuring and impairments
22.1
6.0
268.3
Total operating expenses
356.9
372.8
(4.3)
Operating loss
$
(337.2)
$
(349.5)
(3.5)
%
Three Quarters
Ended
Net revenues
52.3
50.9
2.8
Product and distribution costs
51.8
51.8
—
Other operating expenses
10.4
13.4
(22.4)
Depreciation and amortization expenses
110.3
119.4
(7.6)
General and administrative expenses
832.9
903.4
(7.8)
Restructuring and impairments
22.4
20.5
9.3
Total operating expenses
1,027.8
1,108.5
(7.3)
Operating loss
$
(975.5)
$
(1,057.6)
(7.8)
%
Corporate and Other primarily consists of our unallocated
corporate operating expenses and Evolution Fresh.
STARBUCKS CORPORATION
CONSOLIDATED BALANCE
SHEETS
(unaudited, in millions, except
per share data)
Jun 28, 2020
Sep 29, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
3,965.9
$
2,686.6
Short-term investments
229.9
70.5
Accounts receivable, net
881.1
879.2
Inventories
1,583.8
1,529.4
Prepaid expenses and other current
assets
920.3
488.2
Total current assets
7,581.0
5,653.9
Long-term investments
223.4
220.0
Equity investments
426.1
396.0
Property, plant and equipment, net
6,295.6
6,431.7
Operating lease, right-of-use asset
8,214.0
—
Deferred income taxes, net
1,740.0
1,765.8
Other long-term assets
550.8
479.6
Other intangible assets
599.6
781.8
Goodwill
3,510.1
3,490.8
TOTAL ASSETS
$
29,140.6
$
19,219.6
LIABILITIES AND SHAREHOLDERS'
EQUITY/(DEFICIT)
Current liabilities:
Accounts payable
$
860.8
$
1,189.7
Accrued liabilities
1,511.7
1,753.7
Accrued payroll and benefits
652.1
664.6
Income taxes payable
90.9
1,291.7
Current portion of operating lease
liability
1,237.1
—
Stored value card liability and current
portion of deferred revenue
1,463.3
1,269.0
Short-term debt
936.5
—
Current portion of long-term debt
1,249.6
—
Total current liabilities
8,002.0
6,168.7
Long-term debt
14,645.6
11,167.0
Operating lease liability
7,653.6
—
Deferred revenue
6,642.6
6,744.4
Other long-term liabilities
821.1
1,370.5
Total liabilities
37,764.9
25,450.6
Shareholders’ equity/(deficit):
Common stock ($0.001 par value) —
authorized, 2,400.0 shares; issued and outstanding, 1,168.9 and
1,184.6 shares, respectively
1.2
1.2
Additional paid-in capital
115.4
41.1
Retained earnings/(deficit)
(8,208.3
)
(5,771.2
)
Accumulated other comprehensive loss
(529.9
)
(503.3
)
Total shareholders’ equity/(deficit)
(8,621.6
)
(6,232.2
)
Noncontrolling interests
(2.7
)
1.2
Total equity/(deficit)
(8,624.3
)
(6,231.0
)
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY/(DEFICIT)
$
29,140.6
$
19,219.6
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited and in millions)
Three Quarters Ended
Jun 28, 2020
Jun 30, 2019
OPERATING ACTIVITIES:
Net earnings including noncontrolling
interests
$
532.0
$
2,792.2
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization
1,124.0
1,083.6
Deferred income taxes, net
20.0
(1,243.5
)
Income earned from equity method
investees
(182.3
)
(174.1
)
Distributions received from equity method
investees
165.6
163.7
Net gain resulting from divestiture of
certain retail operations
—
(622.8
)
Stock-based compensation
188.0
255.4
Goodwill impairments
—
10.5
Non-cash lease costs
902.4
—
Loss on retirement and impairment of
assets
124.6
50.5
Other
63.7
71.8
Cash provided by/(used in) changes in
operating assets and liabilities:
Accounts receivable
13.4
(70.1
)
Inventories
(51.7
)
(140.5
)
Prepaid expenses and other current
assets
(492.1
)
831.6
Income taxes payable
(1,224.5
)
1,045.4
Accounts payable
(320.3
)
(15.1
)
Deferred revenue
92.0
(32.4
)
Operating lease liability
(918.2
)
—
Other operating assets and liabilities
70.5
(67.4
)
Net cash provided by operating
activities
107.1
3,938.8
INVESTING ACTIVITIES:
Purchases of investments
(297.4
)
(176.3
)
Sales of investments
133.5
281.7
Maturities and calls of investments
10.0
57.5
Additions to property, plant and
equipment
(1,138.4
)
(1,280.7
)
Net proceeds from the divestiture of
certain operations
—
684.2
Other
(39.4
)
(72.9
)
Net cash used in investing activities
(1,331.7
)
(506.5
)
FINANCING ACTIVITIES:
Proceeds from issuance of short-term
debt
1,157.2
—
Repayments of short-term debt
(220.7
)
—
Proceeds from issuance of long-term
debt
4,727.6
1,996.0
Repayments of long-term debt
—
(350.0
)
Proceeds from issuance of common stock
98.9
358.5
Cash dividends paid
(1,444.2
)
(1,330.7
)
Repurchase of common stock
(1,698.9
)
(7,972.9
)
Minimum tax withholdings on share-based
awards
(89.1
)
(106.1
)
Other
(37.8
)
(17.6
)
Net cash provided by/(used in) financing
activities
2,493.0
(7,422.8
)
Effect of exchange rate changes on cash
and cash equivalents
10.9
(2.5
)
Net increase/(decrease) in cash and cash
equivalents
1,279.3
(3,993.0
)
CASH AND CASH EQUIVALENTS:
Beginning of period
2,686.6
8,756.3
End of period
$
3,965.9
$
4,763.3
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest, net of capitalized interest
$
274.3
$
219.9
Income taxes
$
1,691.1
$
126.2
Supplemental
Information
The following supplemental information is
provided for historical and comparative purposes.
U.S. Supplemental Data
Quarter Ended
($ in millions)
Jun 28, 2020
Jun 30, 2019
Change (%)
Revenues
$2,621.1
$4,288.1
(39)%
Comparable Store Sales Growth (1)
(40)%
7%
Change in Transactions
(52)%
3%
Change in Ticket
25%
3%
Store Count
15,243
14,883
2%
(1)
Includes only Starbucks® company-operated
stores open 13 months or longer. The results from Siren Retail
operations are not reflected in comparable store sales. Comparable
store sales include stores that were temporarily closed as a result
of the COVID-19 outbreak and exclude stores identified for
permanent closure.
China Supplemental Data
Quarter Ended
($ in millions)
Jun 28, 2020
Jun 30, 2019
Change (%)
Revenues
$624.4
$735.2
(15)%
Comparable Store Sales Growth (1)
(19)%
6%
Change in Transactions
(27)%
2%
Change in Ticket
10%
4%
Store Count
4,447
3,924
13%
(1)
Includes only Starbucks® company-operated
stores open 13 months or longer. Comparable store sales exclude the
effects of fluctuations in foreign currency exchange rates, stores
identified for permanent closure and Siren Retail stores.
Comparable store sales include stores that were temporarily closed
as a result of the COVID-19 outbreak, and for the third quarter of
fiscal 2020, include a 4% benefit related to a temporary
value-added tax exemption.
Store Data
Net stores opened/(closed) and
transferred during the period
Quarter Ended
Three Quarters Ended
Stores open as of
Jun 28, 2020
Jun 30, 2019
Jun 28, 2020
Jun 30, 2019
Jun 28, 2020
Jun 30, 2019
Americas:
Company-operated stores
(34
)
81
43
167
10,017
9,857
Licensed stores
(2
)
53
125
226
8,218
7,996
Total Americas
(36
)
134
168
393
18,235
17,853
International:
Company-operated stores
117
(233
)
394
(5
)
6,254
5,646
Licensed stores
49
541
362
926
7,691
7,127
Total International
166
308
756
921
13,945
12,773
Corporate and Other(1):
Licensed stores
—
—
—
(12
)
—
—
Total Corporate and Other
—
—
—
(12
)
—
—
Total Company
130
442
924
1,302
32,180
30,626
(1)
Corporate and Other store data includes
the closure of 12 Teavana® retail stores in the first quarter of
fiscal 2019.
Non-GAAP Disclosure
In addition to the GAAP results provided in this release, the
company provides certain non-GAAP financial measures that are not
in accordance with, or alternatives for, generally accepted
accounting principles in the United States. Our non-GAAP financial
measures of non-GAAP G&A, non-GAAP operating income/(loss),
non-GAAP operating income/(loss) growth, non-GAAP operating margin,
non-GAAP effective tax rate and non-GAAP earnings/(loss) per share
exclude the below-listed items and their related tax impacts, as
they do not contribute to a meaningful evaluation of the company’s
future operating performance or comparisons to the company's past
operating performance. The GAAP measures most directly comparable
to non-GAAP G&A, non-GAAP operating income/(loss), non-GAAP
operating income/(loss) growth, non-GAAP operating margin, non-GAAP
effective tax rate and non-GAAP earnings/(loss) per share are
general and administrative expenses, operating income/(loss),
operating income/(loss) growth, operating margin, effective tax
rate and diluted net earnings/(loss) per share, respectively.
Non-GAAP Exclusion
Rationale
Gain on sale of certain retail
operations
Management excludes the gains related to
the sale of our retail operations in Thailand, France and the
Netherlands as these items do not reflect future gains or tax
impacts for reasons discussed above.
Restructuring and impairment costs
Management excludes restructuring and
impairment costs relating to the write-down of certain
company-operated stores and intangible assets. Management excludes
these items for reasons discussed above. These expenses are
anticipated to be completed within a finite period of time.
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.
2018 U.S. stock award
Management excludes the incremental
stock-based compensation award granted in the third quarter of
fiscal 2018 for reasons discussed above.
Nestlé transaction and integration-related
costs
Management excludes the transaction and
integration-related costs related to the Global Coffee Alliance
with Nestlé (inclusive of incremental costs to grow and develop the
alliance) for reasons discussed above.
Non-GAAP G&A, non-GAAP operating income/(loss), non-GAAP
operating income/(loss) growth, non-GAAP operating margin, non-GAAP
effective tax rate and non-GAAP earnings/(loss) per share may have
limitations as analytical tools. These measures should not be
considered in isolation or as a substitute for analysis of the
company’s results as reported under GAAP. Other companies may
calculate these non-GAAP financial measures differently than the
company does, limiting the usefulness of those measures for
comparative purposes.
Certain non-GAAP measures included in this report were not
reconciled to the comparable GAAP financial measures because the
GAAP measures are not accessible on a forward-looking basis. The
company is unable to reconcile these forward-looking non-GAAP
financial measures to the most directly comparable GAAP measures
without unreasonable efforts because the company is currently
unable to predict with a reasonable degree of certainty the type
and extent of certain items that would be expected to impact GAAP
measures for these periods but would not impact the non-GAAP
measures. Such items may include acquisitions, divestitures,
restructuring and other items. The unavailable information could
have a significant impact on the company’s GAAP financial
results.
STARBUCKS CORPORATION
RECONCILIATION OF SELECTED
GAAP MEASURES TO NON-GAAP MEASURES
(unaudited)
($ in millions)
Quarter Ended
Consolidated
Jun 28, 2020
Jun 30, 2019
Change
General and administrative expenses, as
reported (GAAP)
$
399.9
$
459.7
(13.0)%
Restructuring and impairment costs (1)
(0.1)
0.4
International transaction and
integration-related items (2)
(3.3)
(10.5)
2018 U.S. stock award (3)
—
(14.4)
Nestlé transaction and integration-related
costs (5)
—
(0.8)
Non-GAAP G&A
$
396.5
$
434.4
(8.7)%
Non-GAAP G&A as a % of total net
revenues (4)
9.4
%
6.4
%
Operating income/(loss), as reported
(GAAP)
$
(703.9)
$
1,121.3
(162.8)%
Restructuring and impairment costs (1)
78.2
39.6
International transaction and
integration-related items (2)
60.5
69.0
2018 U.S. stock award (3)
—
14.4
Nestlé transaction and integration-related
costs (5)
35.0
2.3
Non-GAAP operating income/(loss)
$
(530.2)
$
1,246.6
(142.5)%
Operating margin, as reported (GAAP)
(16.7)
%
16.4
%
(3,310) bps
Restructuring and impairment costs (1)
1.9
0.7
International transaction and
integration-related items (2)
1.4
1.0
2018 U.S. stock award (3)
—
0.2
Nestlé transaction and integration-related
costs (5)
0.8
—
Non-GAAP operating margin
(12.6)
%
18.3
%
(3,090) bps
Diluted net earnings/(loss) per share, as
reported (GAAP)
$
(0.58)
$
1.12
(151.8)%
Gain on sale of certain retail
operations
—
(0.49)
Restructuring and impairment costs (1)
0.07
0.04
International transaction and
integration-related items (2)
0.05
0.06
2018 U.S. stock award (3)
—
0.01
Nestlé transaction and integration-related
costs (5)
0.03
—
Income tax effect on Non-GAAP adjustments
(6)
(0.03)
0.04
Non-GAAP earnings/(loss) per share
$
(0.46)
$
0.78
(159.0)%
(1)
Represents costs associated with our
restructuring efforts, primarily severance and asset impairments
related to certain company-operated store closures and impairment
of an intangible asset.
(2)
Includes transaction costs for the
acquisition of our East China 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)
Non-GAAP G&A as a percentage of total
net revenues for the third quarter of fiscal 2020 was 9.4%.
Non-GAAP G&A as a percentage of total net revenues for fiscal
years 2019 and 2018 was 6.5% and 6.4%, respectively. Refer to the
Starbucks Investor Relations website for additional information
regarding historical non-GAAP information.
(5)
Represents costs associated with the
Global Coffee Alliance with Nestlé.
(6)
Adjustments were determined based on the
nature of the underlying items and their relevant jurisdictional
tax rates.
Q3 QTD FY20 NON-GAAP
DISCLOSURE DETAILS
(Pretax $ in millions and
USD)
Q3 QTD FY20
Americas
International
Channel Development
Corporate and Other
Consolidated
Statement of Earnings Line Item
Restructuring, Impairment and
Optimization Costs
International Transaction and
Integration Costs
Restructuring, Impairment and
Optimization Costs
Nestlé Transaction and
Integration-Related Costs
International Transaction and
Integration Costs
Restructuring, Impairment
& Optimization Costs
Total Non-GAAP
Adjustment
Net revenue
Production and distribution costs
—
Store operating expenses
4.3
4.3
Other operating expenses
35.0
35.0
Depreciation and amortization expenses
52.9
52.9
General and administrative expenses
3.0
0.3
0.1
3.4
Restructuring and impairments
56.2
(0.2
)
22.1
78.1
Income from equity investees
—
Total impact to operating loss
(56.2
)
(60.2
)
0.2
(35.0
)
(0.3
)
(22.2
)
(173.7
)
Quarter Ended
Year Ended
Consolidated
Sep 27, 2020
Sep 27, 2020
(Projected)
(Projected)
Diluted net earnings per share (GAAP)
$ 0.06 - 0.21
$ 0.50 - 0.65
Restructuring and impairment costs (1)
0.11
0.18
International transaction and
integration-related items (2)
0.05
0.20
Nestlé transaction and integration-related
costs
—
0.04
Income tax effect on Non-GAAP adjustments
(3)
(0.04
)
(0.09
)
Non-GAAP earnings per share
$ 0.18 - 0.33
$ 0.83 - 0.98
(1)
Represents costs associated with our
restructuring efforts in the U.S. and Canada company-operated
business and impairment of an intangible asset.
(2)
Includes transaction costs for the
acquisition of our East China 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)
Adjustments were determined based on the
nature of the underlying items and their relevant jurisdictional
tax rates.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200728005948/en/
Starbucks Contact, Investor Relations: Durga Doraisamy
206-318-7118 investorrelations@starbucks.com
Starbucks Contact, Media: Reggie Borges 206-318-7100
press@starbucks.com
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