Introduces Three-Year Financial Roadmap,
Delivering Annual 7-9% Comparable Store Sales Growth, 10-12%
Revenue Growth, and 15-20% Non-GAAP EPS Growth
Starbucks (NASDAQ: SBUX) today hosted its biennial Investor Day
in Seattle where interim chief executive officer Howard Schultz,
chief financial officer Rachel Ruggeri, and Starbucks leaders
showcased the company’s Reinvention plan to an in-person audience
of more than 150 investors. Presentations highlighted decisive
actions and targeted investments in partners, customers, and stores
that are expected to accelerate the company’s long-term growth,
progressively expand operating margin, and drive high-teens
non-GAAP EPS growth annually through fiscal 2025.
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the full release here:
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Starbucks interim chief executive officer
Howard Schultz showcases the company’s Reinvention plan to an
in-person audience of more than 150 investors. (Photo: Business
Wire)
“As we execute on our Reinvention plan, we are building on our
51-year history of market leading innovation to position our
business and our brand for the next chapter of growth,” said
Schultz. “Guided directly by our partners, we have already begun to
take action on an inspired roadmap to build the future of
Starbucks, all while staying true to our mission of uplifting
communities through a shared love for coffee and further extending
our coffee leadership and innovation. I am confident that our
partners and world-class leadership team will capture the
significant global growth opportunity ahead, unlocking value for
all our stakeholders.”
Schultz also introduced incoming ceo Laxman Narasimhan, who
shared his enthusiasm for the Reinvention plan. Narasimhan will
officially join Starbucks on October 1, 2022 and will work closely
with Schultz before assuming the ceo role and joining the Board in
April 2023. Schultz will remain as a member of the Board after the
transition.
Starbucks Unveils Roadmap for Accelerated EPS Growth
In connection with its Reinvention plan, Starbucks introduced a
framework for accelerated earnings growth over the next three
years, underpinned by enhanced comparable store sales growth,
increased store count growth, continued margin expansion, and
disciplined capital allocation.
“Starbucks is a growth company, and our accelerated expansion is
a direct reflection of the expected returns from our Reinvention
plan,” said Ruggeri. “By making strategic and highly targeted
investments to drive value for partners, Starbucks will also drive
value for customers and shareholders, while managing costs,
improving margins, and elevating the Starbucks Experience for all
stakeholders.”
From fiscal 2023 to fiscal 2025, Starbucks expects comparable
store sales growth to be in the range of 7% to 9% annually, both
globally and in the U.S., up from the previous range of 4% to 5%.
In China, Starbucks expects outsized comparable store sales
performance in fiscal 2023 and fiscal 2024, as the market laps the
severe impact of COVID-related lockdowns, with growth normalizing
in the new range of 4% to 6% in fiscal 2025, an increase from the
prior range of 2% to 4%, reflecting an increased digital capability
and confidence in the vast opportunity ahead in this key growth
market.
The company’s global store portfolio is expected to grow by
roughly 7% annually on a net basis from fiscal 2023 to fiscal 2025,
up from the previous estimate of approximately 6%. This increase is
driven largely by accelerated growth across the U.S. portfolio as
purpose-built store formats in conjunction with the Reinvention
plan is expected to deliver net new store growth of 3% to 4%
annually, compared to approximately 3% as previously estimated.
Starbucks also expects to continue robust store development in
China, with net unit growth of approximately 13% annually.
Globally, Starbucks expects to approach 45,000 stores by the end of
2025, and is well on track to reach approximately 55,000 stores by
2030, as projected at its 2020 Investor Day.
Starbucks now expects global revenue growth in the range of 10%
to 12% annually from fiscal 2023 to fiscal 2025. This represents an
improvement from the company’s previous range of 8% to 10%, driven
by priority investments that elevate partner engagement and store
efficiency, industry-leading digital programs, an engaged and
growing Starbucks® Rewards membership base, game-changing product
innovation, and a rapidly expanding global footprint. The company
expects solid margin expansion in fiscal 2023 with progressively
more expansion in fiscal 2024 and fiscal 2025. Non-GAAP EPS growth
is expected to be in the range of 15% to 20% annually through
fiscal 2025, representing an improvement from the previous range of
10% to 12%.
Starbucks plans to resume its share buyback program
reinstituting a healthy return of shareholder capital, yielding an
annual EPS benefit of approximately 1%, net of incremental
interest, beginning in fiscal year 2024. Between dividends and
share buybacks, the company expects to return approximately $20
billion to its shareholders in the next three years.
Centering the Partner Experience in a Thriving
Network
Starbucks partners are at the core of the Reinvention plan, as
the company recommits to investing in its partner base with a
three-pronged model of support that empowers partners to thrive at
work, thrive as individuals, and thrive together. Specifically, by
investing in partners through recruiting, training, and onboarding,
partners will be better empowered and equipped to deliver
high-quality customer experiences, uplifting brand affinity and
customer loyalty. This, in turn, enables increased value back to
partners through wages, benefits, programming, and tools for
continued personal growth, which are expected to increase retention
and productivity.
For fiscal 2023, Starbucks has identified a number of near-term
solutions that will be implemented to ensure a thriving partner
experience:
- Wage and recognition innovation, including helping give
partners the hours they need, expanding digital tipping, and
incorporating other opportunities to increase overall pay.
- New well-being benefits, including offering enhanced
sick pay, new savings and student loan management benefits, and
additional mental health support.
- Personalized career mobility through a newly introduced
partner app and the development of personalized career paths.
- Investments in store managers, including new leadership
trainings, reinvention of scheduling and decisioning tools, and
career journey mapping to improve store manager retention and
empower them to focus on core functions of the job that increase
satisfaction and overall performance of their store partners.
Stores managed by partners with over three years of tenure have 13%
greater weekly sales and higher customer satisfaction.
This important work is beginning with Starbucks over 9,000 U.S.
company-operated stores. Starbucks then plans to rapidly implement
the most effective and scalable best practices to its other U.S.
and global stores.
Unlocking Experiential Convenience for Customers
As part of the Reinvention plan, Starbucks is unlocking the
intersection of convenience and connection by introducing
enhancements to the customer experience across retail and digital
that meet customers wherever they are, expanding the Third Place
experience beyond the physical store. As part of these efforts,
Starbucks is investing in purpose-built store concepts, delivering
beverage innovation, and expanding effortless digital
convenience.
Investing in purpose-built store concepts: Starbucks is
reimagining the store environment by introducing purpose-built
store concepts that meet customers wherever and whenever they want
and improve the partner experience. This includes investing an
incremental $450M in the existing U.S. store base in fiscal year
2023 with continued investment in fiscal 2024 and 2025. Starbucks
expects these investments will create efficiencies, unlock capacity
for partners, and enable increased throughput to support increasing
customer demand.
With new store economics expected to continue delivering 50%
return on investment and 25% cash margin, Starbucks looks to
accelerate U.S store growth to 3-4% annually. The company sees
tremendous opportunity to further diversify and expand formats
across cafes, pick up, delivery-only and drive-thru only locations.
The diversified portfolio of stores and customer channels such as
Mobile Order & Pay will enable Starbucks to further meet its
customers whenever and wherever they want.
Delivering beverage innovation: To improve partner and
customer experiences, Starbucks has developed the Siren System, a
proprietary new equipment innovation designed to meet the growing
demand for customization of hot and cold beverages and warm foods.
As part of the Siren System, Starbucks has redesigned its cold
beverage station, which significantly reduces the time and number
of steps to make cold beverages, unlocking productivity gains and
ultimately freeing up time for partners to connect with customers.
In addition, Starbucks is developing a new way of extracting cold
coffee and espresso with the Cold Pressed Cold Brew system. This
new, proprietary technology delivers cold press coffee in a matter
of seconds and in fewer than four steps, a step-change improvement
when compared to today’s cold brew which is steeped for 20 hours
and takes more than 20 steps to make. The Cold Pressed Cold Brew
will begin testing in stores in fiscal 2023.
Starbucks is also elevating the quality and craft of hot brewed
coffee with the launch of Clover Vertica. Using proprietary Clover
technology, Clover Vertica offers every customer a freshly ground,
freshly brewed cup of hot coffee in just 30 seconds. Starbucks has
already begun rolling out this equipment to stores and expects it
will be fully deployed to all U.S. stores in the next three
years.
Expanding effortless digital convenience: Today’s
customers are increasingly prioritizing the effortless,
experiential convenience and personalization enabled by Starbucks
Rewards, Mobile Order & Pay, and Starbucks Delivers. To make it
even easier for customers to get Starbucks when and where they
want, Starbucks is growing its Starbucks Delivers program in the
U.S. with a new partnership with DoorDash, which will expand to a
national scale alongside UberEats in fiscal 2023.
As previously announced, Starbucks is also evolving its
Starbucks Rewards program with Starbucks Odyssey, a Web3-enabled
experience that will bridge the physical and digital customer
experience. Through Starbucks Odyssey, customers will unlock a new
generation of experiential benefits – both digitally and in-person
– and become a part of a digital community built on human
connection.
Accelerating Starbucks Leadership Position in
International
Starbucks International segment continues to accelerate growth
for the company, with two-thirds of global retail growth over the
next three years expected to come from its international business.
Underpinning this strong foundation and ongoing momentum is the
strength of the licensing model, acceleration of the digital
Starbucks Experience, and the purpose-driven growth agenda in
China.
Strength of the licensing model: Licensed stores
represent more than 50% of the Starbucks International portfolio
and are driving a significant portion of future growth through
best-in-class operations experience, paired with unparalleled
expertise in the markets they operate and the needs of their local
customers. Under Starbucks licensing model, licensees are
positioned as business partners, who not only operate stores but
also invest in and drive innovation at the company – for example,
through region-specific beverages – and growth in their markets and
across the globe. The licensing model is a key competitive
advantage and enabler for Starbucks, culminating in higher return
on invested capital and positioning the company to realize the full
potential of the brand. In total, Starbucks has over 17,000
licensed stores including 6,500 in the U.S.
Acceleration of the digital Starbucks Experience: While
International is still in the early stages of digital expansion,
Starbucks has the foundation in place to significantly accelerate
growth with 28 million active Starbucks Rewards members
internationally. Today, just over 10% of transactions in
international licensed stores originate digitally. To accelerate
the rollout of the digital Starbucks Experience around the world,
Starbucks is unveiling Starbucks Digital Solutions, a platform
created exclusively for our International markets to deliver a
consistent digital experience for partners and customers in every
location.
Purpose-driven growth agenda in China: Even as Starbucks
second largest market, China’s coffee market is still in its early
stages, and Starbucks is evolving its growth framework in the
market to capture its full growth potential. Through the flywheel
of continued store expansion, growth in omni-channel, ongoing
digitization efforts, increased customer and partner engagement,
and the extension of coffee craft and innovation leadership,
Starbucks will drive meaningful growth in China, as sales are
expected to nearly double over the next three years, while store
count is expected to grow by 50%, reaching 9,000 stores.
Long Runway for Growth in At-Home and Ready-to-Drink
Through Starbucks leadership position in the at-home and
ready-to-drink channels, the company reaches customers across every
major coffee segment, providing an elevated experience wherever its
customers are. Today, Starbucks serves 300 million consumer
occasions per week across 86 markets in channels outside of its
retail stores. Starbucks sees significant opportunity for further
growth through portfolio expansion, innovation and leveraging
Starbucks partnership expertise. In at-home coffee, Starbucks is
expanding its reach with products that highlight its strengths in
locally relevant ways, such as the recent launch of Starbucks
super-premium mini cups in China, and the upcoming launch of
Starbucks® Reserve on Nespresso Vertuo. Starbucks is also
innovating and introducing new bold flavors and formats in
ready-to-drink, entering the energy category with the launch of
Starbucks Baya™ Energy and bringing the Starbucks® Pink Drink,
inspired by a global customer favorite, to a convenient new
ready-to-drink format.
Webcast
A replay of the webcast and slides shown during the event’s
presentations will be available on the Events & Presentations
section of the company’s website on Wednesday, September 14,
2022.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to
ethically sourcing and roasting high-quality arabica coffee. Today,
with nearly 35,000 stores worldwide, 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.
Non-GAAP Financial Measures
Certain financial measures included in the release are not
measures of financial performance under U.S. generally accepted
accounting principles (“GAAP”). Certain non-GAAP measures such as
earnings per share were not reconciled to the comparable GAAP
financial measures because the GAAP measures are not accessible on
a forward-looking basis. All forward-looking non-GAAP measures may
exclude estimates for acquisitions, divestitures, restructuring,
and other items, which are fluid and unpredictable in nature. The
company is unable to reconcile these forward-looking non-GAAP
financial measures to the most directly comparable GAAP measures
with sufficient precision 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. The unavailable information could
have a significant impact on the company’s GAAP financial results.
References in the release are on a non-GAAP basis unless otherwise
noted, or if there's no non-GAAP adjustment related to the
metric.
Forward-Looking Statements
Certain statements contained herein are “forward-looking”
statements within the meaning of applicable securities laws and
regulations. Generally, these statements can be identified by the
use of words such as “aim,” “anticipate,” “believe,” “continue,”
“could,” “estimate,” “expect,” “feel,” “forecast,” “intend,” “may,”
“outlook,” “plan,” “potential,” “predict,” “project,” “seek,”
“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 trends in or expectations
relating to the effects of our existing and any future initiatives,
strategies, investments and plans, including our reinvention plan,
as well as trends in or expectations regarding our financial
results and long-term growth model and drivers; our operations in
the U.S. and China; our environmental, social and governance
efforts; our partners; economic and consumer trends, including the
impact of inflationary pressures; impact of foreign currency
translation; strategic pricing actions; the conversion of certain
market operations to fully licensed models; our plans for
streamlining our operations, including store openings, closures and
changes in store formats and models; expanding our licensing to
Nestlé of our consumer packaged goods and Foodservice businesses
and its effects on our Channel Development segment results; tax
rates; business opportunities and expansion; strategic
acquisitions; our dividends programs; commodity costs and our
mitigation strategies; our liquidity, cash flow from operations,
investments, borrowing capacity and use of proceeds; continuing
compliance with our covenants under our credit facilities and
commercial paper program; repatriation of cash to the U.S.; the
likelihood of the issuance of additional debt and the applicable
interest rate; the continuing impact of the COVID-19 pandemic on
our financial results and future availability of governmental
subsidies for COVID-19 or other public health events; our ceo
transition; our share repurchase program; our use of cash and cash
requirements; the expected effects of new accounting pronouncements
and the estimated impact of changes in U.S. tax law, including on
tax rates, investments funded by these changes and potential
outcomes; and effects of legal proceedings. Such statements are
based on currently available operating, financial and competitive
information and are subject to various risks and uncertainties.
Actual future results and trends may differ materially depending on
a variety of factors, including, but not limited to: the continuing
impact of COVID-19 on our business; 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 resurgence of COVID-19 infections and the
circulation of novel variants of COVID-19; 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; new initiatives and plans or
revisions to existing initiatives or plans; our ability to obtain
financing on acceptable terms; the acceptance of the Company’s
products by our customers, evolving consumer preferences and tastes
and changes in consumer spending behavior; partner investments,
changes in the availability and cost of labor including any union
organizing efforts and our responses to such efforts; failure to
attract or retain key executive or employee talent or successfully
transition executives; significant increased logistics costs;
inflationary pressures; the impact of competition; inherent risks
of operating a global business including any potential negative
effects stemming from the Russian invasion of Ukraine; 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 our filings with the Securities and
Exchange Commission, including in the “Risk Factors” and
“Management's Discussion and Analysis of Financial Condition and
Results of Operations” sections of the company’s most recently
filed periodic reports on Form 10-K and Form 10-Q and subsequent
filings.
A forward-looking statement is neither a prediction nor a
guarantee of future events or circumstances, and those future
events or circumstances may not occur. You should not place undue
reliance on the forward-looking statements, which speak only as of
the date of this release. We are under no obligation to update or
alter any forward-looking statements, whether as a result of new
information, future events or otherwise.
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version on businesswire.com: https://www.businesswire.com/news/home/20220913006189/en/
Maggie Jantzen press@starbucks.com 206-318-7100
Starbucks (NASDAQ:SBUX)
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