Starbucks Corp (SBUX, Financial), one of the most widely recognized restaurant brands in the world, operates more than 38,000 stores across more than 80 countries as of the end of fiscal 2023. The firm operates in three segments: North America, international markets, and channel development (grocery and ready-to-drink beverage). The coffee chain generates revenue from company-operated stores, royalties, sales of equipment and products to license partners, ready-to-drink beverages, packaged coffee sales, and single-serve products.
Performance Overview
Starbucks Corp (SBUX, Financial) reported Q3 consolidated net revenues of $9.1 billion, a 1% decline year-over-year, but a 1% increase on a constant currency basis. The company achieved GAAP and non-GAAP earnings per share (EPS) of $0.93, aligning with analyst estimates. However, the revenue fell short of the estimated $9.24 billion.
Key Financial Metrics
Global comparable store sales declined 3%, driven by a 5% decrease in comparable transactions, partially offset by a 2% increase in average ticket. North America comparable store sales declined 2%, while international comparable store sales saw a 7% decline, with China experiencing a significant 14% drop.
| Segment | Revenue (in millions) | Change (%) | Operating Income (in millions) | Operating Margin (%) |
|---|---|---|---|---|
| North America | $6,816.7 | 1% | $1,432.7 | 21.0% |
| International | $1,842.1 | -7% | $287.5 | 15.6% |
| Channel Development | $438.3 | -2% | $235.2 | 53.7% |
Challenges and Achievements
Starbucks Corp (SBUX, Financial) faced several challenges, including a decline in global comparable store sales and a contraction in operating margins. The GAAP operating margin contracted by 60 basis points to 16.7%, primarily due to increased promotional activity, investments in store partner wages and benefits, and deleverage. Despite these challenges, the company opened 526 net new stores in Q3, ending the period with 39,477 stores globally.
"Our three-part action plan is beginning to work and driving operational improvements that we expect to improve financial performance," commented Laxman Narasimhan, chief executive officer.
Income Statement Highlights
Starbucks Corp (SBUX, Financial) reported a net earnings decline of 7.5% year-over-year to $1.05 billion. The GAAP earnings per share of $0.93 represented a 6% decline over the prior year. The company's effective tax rate increased to 24.8% from 22.0% in the previous year.
Balance Sheet and Cash Flow
Starbucks Corp (SBUX, Financial) maintained a strong balance sheet with disciplined financial management. The company declared a cash dividend of $0.57 per share, payable on August 30, 2024, marking 57 consecutive quarters of dividend payouts.
Analysis
While Starbucks Corp (SBUX, Financial) met EPS expectations, the slight revenue miss and decline in comparable store sales highlight ongoing challenges in the current macroeconomic environment. The company's strategic investments and operational efficiencies are crucial for navigating these headwinds and driving future growth.
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Explore the complete 8-K earnings release (here) from Starbucks Corp for further details.
