Starbucks reports record-high EPS; big growth plans for 2014

 
Nov. 4, 2013 | by Cherryh Butler

Starbucks released Q4 results last week, reporting a 37-percent rise in earnings per share, according to a company press release. The coffee giant also shared that revenue grew 13 percent to $3.8 billion with continued strong comp growth of 8 percent in the Americas and 7 percent globally.

"The fourth quarter of fiscal 2013 capped off by far the best year in Starbucks' 42-year history," said Howard Schultz, chairman, president and CEO of Starbucks Coffee Company. "Our results were driven by disciplined, ongoing efforts to elevate the value and relevance of the Starbucks brand, continued innovation and the success of our efforts to deepen our connection to customers and communities around the world."

Other Q4 highlights included:

  • Global comparable store sales grew 7 percent, driven by a 5 percent increase in traffic.
  • 8 percent comp growth in the Americas and the U.S.
  • 2 percent comp growth in EMEA.
  • 8 percent comp growth in China/Asia Pacific.
  • Consolidated operating income increased 29 percent to $669 million.
  • Consolidated operating margin expanded 220 basis points to 17.6 percent.
  • Opened 558 net new stores in the quarter, including the 1,000th store in both China and Japan.

Fiscal Year 2013 Highlights

  • Total net revenues increased 12 percent to $14.9 billion.
  • Global comparable store sales grew 7 percent, driven by a 5 percent increase in traffic.
  • 7 percent comp growth in the Americas, driven by 8 percent comp growth in the U.S.
  • Comp sales flat in EMEA, traffic increased 2 percent.
  • 9 percent comp growth in China/Asia Pacific, driven by a 7 percent increase in traffic.
  • Consolidated operating income increased 23 percent to $2.5 billion.
  • Consolidated operating margin expanded 150 basis points to a record 16.5 percent.
  • Earnings per share increased 26 percent to $2.26 per share.
  • Opened 1,701 net new stores in the year; ended fiscal 2013 with 19,767 stores globally.
  • Returned $1.2 billion to shareholders through dividend payments and share repurchases.

"Outstanding global sales growth combined with record earnings and operating margin demonstrate the fundamental health of our business model and our continued ability to successfully execute on new initiatives while maintaining financial discipline," said Troy Alstead, CFO and group president. "The strong momentum of the fourth quarter gives us further confidence in our robust outlook for fiscal 2014."

Fiscal 2014 Targets

That "robust outlook" includes opening 1,500 new stores and getting EPS in the range of $2.55 to $2.65. Other goals included:

  • Revenue growth of 10 percent or greater.
  • Global comparable store sales growth in the mid-single digits.
  • Consolidated operating margin improvement of about 150 to 200 basis points over FY13.
  • EMEA: Operating margin improving toward the high single digits.
  • CAP: Operating margin percentage moving toward the low 30s.

Focusing on tea, juice

Recognizing that tea is the world's second-most consumed drink after water, Starbucks recently opened its first tea bar, a Teavana Fine Teas + Tea Bar, in New York City, after buying Teavana last year.  The chain, which opens the second tea bar later this month in Seattle, has plans to add tea bars in the existing 300 Teavana stores and will open 1,000 tea bars over the next 10 years.

The global tea market is worth $90 billion and more than 50 percent of Americans drink tea daily. Although Americans still thrive on coffee, the Tea Association USA reported that total sales for the tea industry have increased by 16 percent over the past five years.

Tea isn't the only new beverage Starbucks is getting into, as the chain's subsidiary, Evolution Fresh, entered a partnership with Whole Foods Market. The partnership allows Whole Foods to sell Evolution Fresh juice and Evolution Harvest snack bars in its more than 8,000 U.S. cafes and grocery retailers.

"Starbucks is well positioned in terms of revenue growth," wrote Shweta Dubey, a research analyst for Seeking Alpha. "We believe Starbucks' expansion beyond coffee will bring growth in the coming years. The stock seems to be undervalued, as it is currently trailing at a PE ratio of 38.11 and a forward PE of 29.82, and it has a ROE of 28.74 percent, which indicates future growth potential."

Read more about growth.

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Topics: Coffee / Specialty Beverages , Franchising & Growth , Operations Management


Cherryh Butler / Cherryh Butler has been a reporter for nearly 10 years, writing on a variety of topics ranging from the restaurant industry to business and health and fitness news. Before joining FastCasual.com as editor, she oversaw KioskMarketplace.com and PizzaMarketplace.com and contributed to RetailCustomerExperience.com. She's also written for several daily newspapers, magazines and websites, including The Kansas City Star and American Fitness magazine.
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