SEATTLE, US – Starbucks Corporation yesterday reported financial results for its 13-week fiscal fourth quarter and 52-week fiscal year ended September 30, 2012. When comparing with prior year results, note that fiscal 2011 included non-routine gains related to the sale of corporate real estate and the acquisition of the company’s joint venture operations in Switzerland and Austria. A reconciliation of select FY11 GAAP measures to non-GAAP measures is included at the end of this document.
Fiscal Fourth Quarter 2012 Highlights:
- Total net revenues increased 11% to a fourth-quarter record of $3.4 billion
- Global comparable store sales increased 6% driven by a 5% increase in traffic and a 1% increase in average ticket
- Americas comparable store sales increased 7% driven by 5% growth in traffic and 2% growth in average ticket
- Operating margin expanded 60 basis points to 15.4% over the prior year’s operating margin of 14.8%, which included a 100 basis point benefit from a non-routine gain in Q4 FY11
- Operating margin expanded 160 basis points when compared to prior year non-GAAP operating margin of 13.8% after excluding the non-routine gain in Q4 FY11
- EPS was $0.46 per share compared to the prior year EPS of $0.47 per share, which included $0.10 relating to non-routine gains in Q4 FY11
- Fourth quarter EPS of $0.46 grew 24% over Q4 FY11 non-GAAP EPS of $0.37 per share, which excluded the non-routine gains in Q4 FY11
- EPS includes charges of $0.02 per share related to store portfolio optimization initiatives in Europe
- The Board of Directors declared a cash dividend of $0.21 per share, a 24% increase from $0.17 per share
Fiscal Year 2012 Highlights:
- Total net revenues increased 14% reaching a record $13.3 billion
- Global comparable store sales increased 7% driven by a 6% increase in traffic and a 1% increase in average ticket
- Americas comparable store sales increased 8% driven by a 6% increase in traffic and a 2% increase in average ticket
- Channel Development revenue grew 50% to $1.3 billion
- The company opened 1,063 net new stores globally
- Operating margin improved 20 basis points to 15.0% over the prior year’s operating margin of 14.8%, which included a non-routine gain in FY11, despite 160 basis points of impact due to higher commodity costs in FY12
- Operating margin expanded 50 basis points when compared to prior year non-GAAP operating margin of 14.5% after excluding the non-routine gain from FY11
- EPS increased 10% to $1.79 per share compared to the prior year EPS of $1.62 per share, which included $0.10 relating to non-routine gains in FY11
- EPS of $1.79 grew 18% over the prior year non-GAAP EPS of $1.52, excluding the non-routine gains in FY11
- Operating cash flow totaled $1.7 billion
- Starbucks returned approximately $1.1 billion to shareholders through share repurchases and dividend payments
“Our Q4 and overall 2012 fiscal year performance demonstrates the strength of our business and brand,” said Howard Schultz, chairman, president and chief executive officer, Starbucks Coffee Company.
“The resiliency and relevance of our U.S. retail business, acceleration of the Channel Development business and expansion in Asia all contributed significantly to our strong results. I am incredibly proud of our 200,000 Starbucks partners around the world who have contributed to the success of the company and I am optimistic about achieving our aspirations for the future.
“Our excellent fourth quarter and full fiscal year results reflect the strength of our business and the solid execution by our partners, specifically illustrated in the fourth quarter by strong traffic growth, continued momentum in Channel Development, and rapid earnings growth,” stated Troy Alstead, chief financial officer.
“By delivering relevant innovation to our customers while increasing focus on execution and operating efficiencies, we drove sales growth and expanded profit margins. On the strength of our business in fiscal 2012 and the momentum we carry into the new fiscal year, we remain confident in our fiscal 2013 outlook of continued strong profitable growth on a global scale.”
Fourth Quarter Fiscal 2012 Summary
Consolidated net revenues reached a fourth-quarter record $3.4 billion in Q4 FY12, an increase of 11% over Q4 FY11. The increase was primarily due to a 6% increase in global comparable stores sales, 32% revenue growth in Channel Development and 14% revenue growth in licensed stores.
The 6% increase in comparable store sales was comprised of a 5% increase in the number of transactions and a 1% increase in average ticket.
Consolidated operating income increased 16% to a record $519.6 million, compared to $448.3 million for the same period a year ago.
Operating margin expanded 60 basis points to a record 15.4% this quarter, compared to 14.8% in the same period last year. Operating margin expanded 160 basis points from 13.8% after excluding the non-routine gain in the prior year. Increased sales leverage was the primary driver of margin expansion.
Americas
Net revenues for the Americas segment were $2.5 billion in Q4 FY12, an increase of 9% over Q4 FY11. The increase was primarily due to a 7% increase in comparable store sales, comprised of a 5% increase in the number of transactions and a 2% increase in average ticket.
Also contributing to the increase were incremental revenues from 504 net new store openings over the past 12 months.
Operating income increased to $536.3 million in Q4 FY12, compared to $444.2 million for the same period a year ago. Operating margin increased 210 basis points to 21.4% in Q4 FY12 primarily due to increased sales leverage.
Net revenues for the EMEA segment were $283.7 million in Q4 FY12, a decrease of 2% over Q4 FY11 primarily driven by unfavorable foreign currency exchange and partially offset by 29% revenue growth in licensed stores.
Emea Segment
The EMEA segment had an operating loss of $6.5 million in Q4 FY12, compared to operating income of $2.5 million for the same period a year ago. Operating margin decreased 320 basis points to -2.3% compared to 0.9% in the prior-year period.
The margin contraction was driven by costs related to store portfolio optimization initiatives in Europe, which had 410 basis points of impact. Excluding these costs, operating margin expanded as a result of improved operational efficiencies.
China Asia Pacific
Net revenues for the China/Asia Pacific segment were $198.0 million in Q4 FY12, an increase of 23% over Q4 FY11. The increase was primarily due to incremental revenues from 154 net new company-operated store openings over the last 12 months and a 10% increase in comparable store sales.
The increase in comparable store sales was attributable to a 7% increase in number of transactions and a 2% increase in average ticket.
Operating income increased 11% to $65.2 million in Q4 FY12, compared to $58.5 million for the same period a year ago. Operating margin decreased 340 basis points to 32.9% in Q4 FY12 compared to 36.3% in the prior-year period.
The margin decline was primarily due to increased spending to support accelerated store growth in China.
Channel Development
net revenues were $318.5 million in Q4 FY12, an increase of 32% over Q4 FY11. The increase was primarily due to sales of Starbucks- and Tazo-branded K-Cup portion packs.
Channel Development operating income was $100.8 million in Q4 FY12 compared to $80.3 million for the same period a year ago. Operating margin declined by 160 basis points to 31.6% in Q4 FY12 compared to 33.2% in the prior-year period. The margin contraction was mainly due to shifts in product mix and higher commodity costs, primarily coffee.
Full Year Financial Results
Consolidated net revenues reached a record $13.3 billion in FY12, an increase of 14% over FY11. The increase was primarily due to a 7% increase in global comparable stores sales, consisting of a 6% increase in the number of transactions and a 1% increase in average ticket, 50% revenue growth in Channel Development, and 20% growth in licensed stores revenue.
Consolidated operating income grew 16% to a record $2.0 billion in FY12, compared to $1.7 billion in FY11. Operating margin expanded 20 basis points to a record 15.0% in FY12 compared to 14.8% in FY11.
The operating margin expansion was 50 basis points when excluding the non-routine gain in the prior year. This improvement was primarily due to increased sales leverage.
Increased commodity costs, mainly coffee, negatively impacted operating income and operating margin in FY12 by approximately $214 million and 160 basis points, respectively.
Fiscal 2013 Targets
Starbucks has updated its fiscal 2013 targets as follows:
- The company is further accelerating its store growth target through the opening of approximately 1,300 net new stores globally, representing 22% growth over fiscal 2012.
- Maintaining its growth target of approximately 600 net new stores in the Americas, with the majority of those in the U.S. Of the approximately 600 stores, approximately half of the additions will be licensed stores.
- Accelerating growth in China/Asia Pacific to approximately 600 net new stores, with licensed stores comprising approximately half of the new additions. Of the approximately 600 stores, slightly more than half will be in China.
- Maintaining growth of approximately 100 net new stores in EMEA (Europe, Middle East, Russia and Africa), with licensed stores comprising more than two thirds of the new stores.
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Starbucks continues to target approximately 10% – 13% revenue growth
driven by mid-single-digit comparable store sales growth, approximately 1,300 net new store openings, and continued strong growth in the Channel Development business.
- The company now expects full-year consolidated operating margin improvement of approximately 100 basis points over FY12 results.
- Reflecting the strength of its global business and the pipeline of profitable growth initiatives, Starbucks is raising its earnings per share target to a range of $2.06 to $2.15, representing growth in the range of 15% – 20%, and consistent with its long-term outlook.
- Capital expenditures are now expected to be approximately $1.2 billion for the full year, reflecting the increase in new store growth and an increase in production capacity to support recently-announced initiatives.
