Starbucks Corp. reported financial results for its fiscal third quarter ended July 3, 2011 and introduced fiscal 2012 targets.
Fiscal third quarter 2011 highlights include:
- Total net revenues increased 12 percent to $2.9 billion;
- Global comparable store sales increased 8 percent, driven by a 6 percent increase in traffic and a 2 percent increase in average ticket;
- Consolidated operating margin was 13.7 percent, up 120 basis points over prior-year period’s GAAP results and 40 basis points over prior-year period’s non-GAAP results;
- U.S. operating margin improved 300 basis points to 18.8 percent on a GAAP basis and 210 basis points over the prior-year period’s non-GAAP results;
- International operating margin improved 200 basis points to 12.2 percent on a GAAP basis and 140 basis points over the prior-year period’s non-GAAP results;
- Global consumer products goods (CPG) operating income increased to $66.0 million, up 20 percent over prior-year period;
- Earnings per share (EPS) increased 33 percent to $0.36 in third quarter 2011 compared to $0.27 in third quarter 2010;
- The board of directors declared a $0.13 per share cash dividend to shareholders of record as of Aug. 10, 2011, which will be paid on Aug. 26, 2011.
"Starbucks record third quarter results reflect both the underlying strength and continuing momentum we have been experiencing across all of our business segments and around the world,” said Howard Schultz, chairman, president and CEO in a prepared statement. “These results demonstrate the power, and the extraordinary global potential, of our unique new business model. Starbucks has never been healthier, more connected to our customers and partners, or better positioned to go after the tremendous business opportunities that lie ahead.”
“The exceptional results that we reported today for our fiscal third quarter are a testament to the strength of the Starbucks brand, to the depth of the company’s organizational capabilities, and to the dedication of our partners around the world,” commented Troy Alstead, chief financial officer. “Efforts to enhance the store experience continue to resonate with our customers as strong traffic gains and sales leverage helped mitigate the impact of higher commodity costs. With our global store portfolio performing at record levels and momentum building in CPG, we have a solid foundation in place to pursue continued profitable growth in fiscal 2012 and beyond. As we build upon the strength of the brand and our evolving multi-channel strategy, we expect to drive growth in earnings per share in fiscal 2012 in the range of 15 to 20 percent.”
U.S. net revenues were $2.0 billion in the third quarter of 2011, an increase of 9 percent over third quarter 2010. The increase was primarily due to an 8 percent increase in comparable store sales, comprised of a 6 percent increase in the number of transactions and a 2 percent increase in average ticket.
U.S. operating income for the quarter was $378.6 million compared to $292.3 million for the same period a year ago. Operating margin expanded 300 basis points to 18.8 percent in the quarter compared to 15.8 percent in the corresponding period of fiscal 2010. The margin expansion was primarily due to increased sales leverage and the absence of restructuring charges in fiscal 2011, partially offset by higher coffee costs.
CPG net revenues were $218.4 million in third quarter 2011, an increase of 25 percent over third quarter 201. The increase was primarily due to the benefit of recognizing the full revenue from packaged coffee and tea sales under the direct distribution model.
Operating income for the CPG segment was $66.0 million in the quarter compared to $54.9 million in 2010, with the operating margin decreasing to 30.2 percent of net revenues from 31.5 percent in the prior-year period. This decrease in operating margin was primarily due to higher coffee costs, partially offset by lower marketing costs for Starbucks VIA® Ready Brew compared to the prior-year period.
Starbucks has updated the following fiscal 2011 targets:
- The company is now targeting fiscal 2011 revenue growth of approximately 10 percent on a comparable 52-week basis, driven by comparable store sales growth at the high end of its target range of 3 percent to 7 percent.
- The company now expects to add approximately 600 net new stores (excluding the impact from Borders store closures), with approximately 100 in the U.S. and 500 in International markets.
- Including the impact from Borders store closures, Starbucks is now targeting full-year consolidated operating margin improvement of 50 to 100 basis points over fiscal 2010 non-GAAP results.
- Full-year operating margins for both the U.S. and International segments are now expected to finish near the high end of the 150 to 200 basis point improvement range compared to fiscal 2010 non-GAAP results.
- Operating margin for the CPG segment is now expected to finish near the high end of the 25 percent to 30 percent range.
- Starbucks now expects earnings per share in the range of $1.50 to $1.51, modestly above the previously communicated 15 percent to 20 percent growth over fiscal 2010 non-GAAP EPS on a comparable 52-week basis.
Starbucks has announced its fiscal 2012 targets as follows:
- Starbucks plans to accelerate growth by opening approximately 800 net new stores globally.
- Approximately 200 net new stores in the U.S., with approximately half of the additions being licensed stores.
- Approximately 600 net new stores outside the U.S., with licensed stores comprising approximately two-thirds of the new additions. Net new store openings in China are expected to be approximately one-quarter of the total International new store additions.
- The company is targeting approximately 10 percent revenue growth, driven by mid-single-digit comparable store sales growth, 800 net new store openings, and strong growth in the CPG business.
- Starbucks is targeting full-year operating margin improvement of 50 to 100 basis points on a consolidated basis, driven by improvement in both the U.S. and International segments. Fiscal 2012 CPG margin is expected to be approximately 25 percent.
- The company expects earnings per share growth in the range of 15 percent to 20 percent, consistent with its long-term outlook, and including the unfavorable impact of approximately $0.21 attributable to higher coffee costs.
- Capital expenditures are expected to be approximately $700 million for the full year.
