Starbucks: Reports Record Q4 and Fiscal 2010 Results

Seattle / WA. (sc) Starbucks Corporation reported financial results for its fiscal fourth quarter and fiscal year ended October 03, 2010, periods that included 14 weeks and 53 weeks, respectively, as fiscal 2010 contained an extra week. The company also updated its FY2011 targets.

Fiscal Fourth Quarter 2010 Highlights:

• Total net revenues increased 17,2 percent to 2,8 billion USD; on a 13-week basis, total net revenues increased 8,6 percent to 2,6 billion USD
• Comparable store sales increased eight percent, driven by a five percent increase in traffic and a two percent increase in average ticket
  • U.S. comparable store sales increased eight percent, driven by a six percent increase in traffic and a two percent increase in average ticket
  • International comparable store sales increased seven percent, driven by a four percent increase in traffic and a three percent increase in average ticket
• Consolidated operating margin improved 590 basis points to 14,1 percent; Non-GAAP operating margin increased 390 basis points to 14,3 percent
  • U.S. operating margin improved 800 basis points to 17,3 percent; U.S. Non-GAAP operating margin increased 530 basis points to 17,4 percent
  • International operating margin improved 620 basis points to 13,8 percent; International Non-GAAP operating margin increased 600 basis points to 14,7 percent
• EPS increased to 0,37 USD in Q4/2010 compared to 0,20 USD in Q4/2009; Non-GAAP EPS increased to 0,37 USD in Q4/2010 compared to 0,24 USD in Q4/2009
• Company announced a quarterly cash dividend of 0,13 USD per share

Full-Year 2010 Highlights:

• Total net revenues increased 9,5 percent to 10,7 billion USD
• Comparable store sales increased seven percent, driven by a four percent increase in traffic and a three percent increase in average ticket
  • U.S. comparable store sales increased seven percent, driven by a three percent increase in traffic and a four percent increase in average ticket
  • International comparable store sales increased six percent, driven by a five percent increase in traffic and a one percent increase in average ticket
• Consolidated operating margin improved 760 basis points to 13,3 percent; Non-GAAP operating margin increased 460 basis points to 13,8 percent
  • U.S. operating margin increased 960 basis points to 17,1 percent; U.S. Non-GAAP operating margin increased 640 basis points to 17,4 percent
  • International operating margin more than doubled to 9,8 percent in FY2010; International Non-GAAP operating margin increased 480 basis points to 11,0 percent
• EPS increased 138 percent to 1,24 USD in FY2010 from 0,52 USD in FY2009; Non-GAAP EPS increased 60 percent to 1,28 USD from 0,80 USD in FY 2009
• Operating cash flow totalled 1,7 billion USD; Free cash flow exceeded 1,2 billion USD
• Starbucks returned approximately 460 million USD to shareholders through share repurchases and dividends

«I am delighted with the record fourth quarter and full year results we announced. These results are a credit to the hard work and dedication of Starbucks partners around the world every day, and are particularly gratifying in light of the formidable economic challenges that our customers and we continue to confront in virtually every country and every market in which we operate», said Howard Schultz, chairman, president and ceo. «But beyond the story told by our financial performance, 2010 was a year of tremendous development and progress for Starbucks on many other fronts as well».

«In 2010, we continued to improve our customer experience, further leverage our coffee authority, differentiate Starbucks from competitors and forge deeper connections with consumers around the world through our loyalty program and social and digital media efforts. At the same time, we continued to innovate. Our emerging brands like Starbucks VIA(R) Ready Brew and Seattle´s Best Coffee have become a part of the daily routine for millions of consumers. And we have made great strides in our efforts to expand our products and brands in multiple CPG channels. The spirit and sense of urgency that emanated from our transformational journey over the past few years continues unabated. I am convinced that we are about to enter an era of even more opportunity for Starbucks, and am more convinced than ever that our future has never looked brighter», added Schultz.

«We completed fiscal 2010 with strong momentum throughout our business. Meaningful same store sales growth, coupled with the stronger financial discipline we have adopted within the organization, delivered the excellent results we reported, leaving us well positioned for our next stage of profitable growth», commented Troy Alstead, cfo. «The strong margin improvement we achieved in our U.S. and International businesses reflects the hard work of our partners throughout the organization delivering top line growth while also driving efficiencies in our operations. As a result of Starbucks strong fiscal 2010 performance and the momentum we carried into the new fiscal year, we are increasing our EPS outlook for fiscal 2011 to a range of 1,41 USD to 1,47 USD, representing 15 to 20 percent growth over fiscal 2010 non-GAAP EPS on a 52-week basis».

Fiscal 2011 Targets

Starbucks has reiterated the following fiscal 2011 targets introduced on July 21, 2010:

• Starbucks plans to open approximately 500 net new stores globally; approximately 100 in the U.S. and approximately 400 internationally, the majority of which are expected to be licensed stores.
• The company is targeting mid-to-high single-digit revenue growth based on a 52-week comparable year, driven by low-to-mid single-digit comparable store sales growth.

The company has revised the following 2011 targets introduced on July 21, 2010:

• Starbucks is now targeting full-year operating margin improvement (excluding restructuring charges in FY2010) of 100 to 200 basis points for the U.S. segment. Margin targets remain unchanged for the following: 100 to 200 basis points of improvement for the International segment and a range of 30 percent to 35 percent for the CPG segment. Consolidated operating margin improvement is expected to be approximately 50 to 100 basis points compared to FY2010 non-GAAP operating margin.
• The company now expects EPS of 1,41 USD to 1,47 USD, reflecting 15 percent to 20 percent growth over fiscal 2010 non-GAAP EPS on a 52-week basis. No restructuring charges are anticipated in fiscal 2011.
• Capital expenditures are expected to be approximately 550 million USD to 600 million USD for the full year.
• Commodity costs are now expected to have an unfavourable impact on EPS of approximately 0,08 USD to 0,10 USD, attributable primarily to higher coffee costs. The company´s EPS expectation noted above reflects the impact of higher commodity costs.