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Starbucks reports Q2 results
May 7, 2008
SEATTLE — Starbucks Corp. has reported financial results for its fiscal second quarter ended March 30, 2008, and provided updated information about its revenue expectations for FY 2008. The company also announced its financial targets for the three-year period of fiscal year 2009 through 2011.
For the second quarter, consolidated net revenues increased 12 percent to $2.5 billion, compared with $2.3 billion for the second quarter of 2007. For the 13-week period ended March 30, 2008, net earnings totaled $108.7 million, down 28 percent from $150.8 million reported for the same period last year.
"Fiscal 2008 is a transitional year for Starbucks and, while our financial results are clearly being impacted by reduced frequency to our U.S. stores, we believe that as we continue to execute on the initiatives generated by our transformation agenda, we will reinvigorate the Starbucks Experience for our customers, and in doing so, deliver increased value to our shareholders," said Howard Schultz, Starbucks chairman, president and CEO.
The 12 percent growth in consolidated net revenues was heavily influenced by the U.S. business, which contributed 77 percent of total net revenue. Lower than expected revenue was driven by a mid-single-digit decline in U.S. comparable store sales, driven by decreased traffic, according to the company.
For the quarter, U.S. revenues increased 8 percent to $1.9 billion, mainly due to increased revenues from company-operated retail stores. International revenues expanded 27 percent to $493.4 million as the company continued to expand its store presence in markets outside the United States.
For the first half of fiscal 2008, consolidated net revenues increased 15 percent to $5.3 billion, compared to $4.6 billion for the same period last year. Net earnings totaled $316.8 million for the 26-week period ended March 30, 2008, versus $355.8 million for the first half of fiscal 2007, down 11 percent.
Annual 2008 updates
Starbucks has announced it expects full-year fiscal 2008 EPS to be somewhat lower than the $0.87 reported in fiscal 2007. The company is not providing a more precise expectation, due to the lack of visibility into near-term economic conditions. In line with this revised view, Starbucks anticipates total net revenue growth of 13 percent to 14 percent in FY 2008.
The company lowered its U.S. store opening targets for fiscal 2008 to approximately 1,020 net new stores; 620 company-operated and 400 licensed stores. International store openings are expected to remain at 975 stores. Capital expenditures for fiscal year 2008 are still expected to be approximately $1.1 billion, as the reduction in store-opening investment is being offset by investment in the company's transformation agenda around innovation.
Long-term financial targets: 2009-2011
Starbucks plans to open significantly fewer new stores in the United States over the 2009 to 2011 period, to less than 400 net new stores per year, opening approximately 250 company-operated stores in each of the three years. At the same time, the company plans to continue to accelerate its international unit expansion, targeting net new store openings as follows: approximately 1,050 in 2009, 1,150 in 2010, and 1,300 in 2011.
Including a somewhat lower 2008 store target for the U.S., total store count will be approximately 21,500 stores by the end of fiscal 2011, with the company's international presence growing from approximately 30 percent to more than 40 percent of the global store portfolio.
Revenue Growth
Starbucks is targeting international revenue growth at a compound annual growth rate of 20 percent over the three-year period, driven by new store openings and continued growth in existing stores.
For the U.S. segment, Starbucks is expecting revenue growth of about 5 percent in 2011, with a three-year compound annual growth rate of just over 6 percent. Total company revenues are expected to be slightly more than $14 billion in 2011, representing a 10 percent three-year compound annual growth rate, with growth moderating slightly over the three-year period.
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