News

Starbucks growth boosted by international operations

July 30, 2012

Starbucks same-store sales and revenue boost for the company's fiscal year 2012 third quarter were boosted by growth in select international markets.

The company opened its 600th location in China during the quarter and opened its first location in both Finland and Costa Rica.

For the quarter overall, Starbucks reported a total net revenue increase of 13 percent to $3.3 billion. Meanwhile, U.S. same-store sales increased 7 percent while global comps grew 6 percent.

The company's growing China/Asia Pacific region saw the largest revenue increase.

Net revenues for the region increased 31 percent for the company's third quarter. Revenue grew to $181.8 million in the region, compared to revenue of $138.6 million reported in the same period last year.

The increase was due to incremental revenues from 112 net new company-operated store openings over the last 12 months, compared to a total of 67 openings for the same period last year; higher licensed stores revenue; and a 12 percent increase in same-store sales. Comps growth was the result of an 8 percent increase in the number of transactions and a 4 percent increase in average ticket.

Operating income for the China/Asia Pacific region 37 percent to $61.4 million in Q3 FY12, compared to $44.9 million for the same period last year. Operating margin increased 140 basis points to 33.8 percent, compared to 32.4 percent, in the prior-year period. The margin expansion was primarily driven by increased sales leverage, partially offset by investment spending to support continued growth.

In the Americas

Net revenues for the Americas segment were $2.5 billion for the quarter, an increase of 9 percent over the same quarter last year. The increase was due to a 7 percent increase in same-store sales, including a 5 percent increase in the number of transactions and a 2 percent increase in average ticket. Additionally, licensed store revenue growth of approximately 24 percent contributed to the Americas segment results.

Operating income increased to $512.1 million in Q3 FY12, compared to $450.9 million for the same period a year ago. Operating margin increased 90 basis points to 20.7 percent in Q3 FY12. The margin expansion was due to increased sales leverage, partially offset by the increase in commodity costs, primarily coffee.

For the quarter, the company opened 83 new locations in the U.S., compared to 52 during the same period last year.

EMEA Segment Results

Net revenues for the EMEA segment were $282.0 million in Q3 FY12, an increase of 9 percent over Q3 FY11. The increase was primarily due to incremental revenues from the consolidation of the Switzerland and Austria markets, partially offset by unfavorable foreign currency exchange.

EMEA operating income was $2.6 million in Q3 FY12, compared to operating income of $4.9 million for the same period a year ago. Operating margin decreased 100 basis points to 0.9 percent compared to 1.9 percent in the prior-year period. The margin contraction was primarily driven by higher costs related to the transition to a consolidated food and dairy distribution model in the UK.

The company opened 36 locations in the quarter, the same as reported in the same quarter last year.

"Starbucks record Q3 results demonstrate the continued strength of our global business and brand, the success of multiple, highly innovative consumer packaged goods initiatives and continued acceleration of our China and Asia-Pacific operations," said CEO Howard Schultz in an earnings release. "Despite coming in short of our expectations, I am pleased with the increasing operating leverage we are seeing, the fact that this was our 11th consecutive quarter of record results and the fact that we achieved the results in the face of high legacy commodity costs and challenging economic and consumer headwinds in key markets."

Despite the revenue and same-store sales increases, the company's stock took a dive last week after it missed analysts' projections for the quarter by two cents - coming in at 43 cents per share as opposed to 45 cents. For the company's fourth quarter, it has lowered its outlook to 44 cents to 45 cents per share, slightly below its previous quarterly guidance of 46 cents to 47 cents per share.

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