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Starbucks delivers record Q1 revenues and EPS

Strong Holiday Performance Drives 9% Comp Growth in the U.S. and Americas, 8% Globally. Global Traffic up 4%. Consolidated Net Revenues Rise 12% to a Record $5.4 Billion; Channel Development Revenues Jump 16%. Consolidated Operating Income up 16% to a Record $1.1 Billion; GAAP EPS of $0.46; Non-GAAP EPS up 15% to a Record $0.46. Dollars Loaded on Starbucks Cards Increase 18% to a Record $1.9 Billion

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SEATTLE, U.S. – Starbucks Corporation today reported financial results for its 13-week fiscal first quarter ended December 27, 2015. Fiscal 2016 and fiscal 2015 GAAP results include items which are excluded from non-GAAP results. Please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release for more information.

Q1 Fiscal 2016 Highlights:

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  • Global comparable store sales increased 8%, including a 4% increase in traffic
    • Americas comp store sales increased 9%, including a 4% increase in traffic
    • China/Asia Pacific comp store sales increased 5%, driven by a 4% increase in traffic
    • EMEA comp store sales increased 1%, driven by a 1% increase in traffic
  • Consolidated net revenues grew 12% over Q1 FY15, to a record $5.4 billion
  • Consolidated GAAP operating income increased 16% over Q1 FY15, to a record $1.1 billion
    • Non-GAAP operating income increased 15% over Q1 FY15 non-GAAP, to a record $1.1 billion
  • Consolidated GAAP operating margin increased 60 basis points over Q1 FY15, to a Q1 record 19.7%
    • Non-GAAP operating margin expanded 40 basis points over Q1 FY15 non-GAAP, to a Q1 record 19.9%
  • GAAP EPS of $0.46 versus Q1 FY15 GAAP EPS of $0.65
    • Non-GAAP EPS increased 15% over Q1 FY15 non-GAAP, to a record $0.46
  • Opened 528 net new stores in the quarter globally, including a record 281 stores in China/Asia Pacific and a record 79 stores in EMEA
  • Channel Development revenues increased 16%; operating margin expanded 210 basis points and operating income increased 23% over Q1 FY15
  • Company served over 23 million more customer occasions from its global comp store base – 18 million in the U.S. – in Q1 over the prior year
  • Record $1.9 billion loaded on Starbucks Cards in the U.S. and Canada; 1 in 6 American adults received a Starbucks Card over Holiday, up from 1 in 7 in Q1 FY15
  • Membership in the company’s My Starbucks Rewards loyalty program increased 23%; the company now has more than 11 million active members in the U.S.

“Starbucks record Q1 2016 financial and operating results, highlighted by comp sales increases of 9% in the U.S., 8% globally, another 4% increase in global traffic – and record performance from our Channel Development segment – underscore the accelerating strength and relevance of the Starbucks brand around the world,” said Howard Schultz, Starbucks chairman and ceo.

“Successful retail, CPG, digital, mobile, loyalty, card and investment strategies are combining to accelerate our revenue growth and drive significant margin expansion and EPS leverage.”

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“We’ve entered fiscal 2016 with another record-breaking quarter and a continuation of the accelerating momentum we saw in our business throughout 2015,” said Scott Maw, Starbucks cfo.

“The investments we are making in our people and our business are driving record, industry leading operating and financial performance and consistently strong comp growth, and are both paying off today and setting us up for continued strong performance into the future.”

Fiscal 2016 Targets

Starbucks fiscal year 2016 will include an extra week in the fourth quarter, as fiscal 2016 is a 53-week year for the company.

The company reiterates the following FY16 targets, unless otherwise noted. FY16 targets are based on actual FY15 non-GAAP results and projected FY16 non-GAAP results as noted. Projected FY16 non-GAAP adjustments relate to the acquisition of Starbucks Japan; please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release.

  • Approximately 1,800 net new store openings in the fiscal year:
    • Americas: approximately 700, half licensed
    • China/Asia Pacific: approximately 900, two-thirds licensed
    • EMEA: approximately 200, primarily licensed
  • Full year consolidated revenue growth of 10%+ on a 52 week basis, the 53rd week expected to add approximately 2%
  • Global comparable store sales growth somewhat above mid-single digits
  • FY16 operating margin is expected to increase slightly versus prior year:
    • Americas: expect moderate improvement over prior year
    • China/Asia Pacific: expected to be flat to down slightly versus prior year
    • EMEA: expected to approach 15%
    • Channel Development: expect moderate improvement versus prior year
  • Expecting a consolidated tax rate between 34% and 35%
  • Full year FY16 earnings per share, including the 53rd week in Q4 FY16:
    • GAAP EPS in the range of $1.84 to $1.86
    • Non-GAAP EPS in the range of $1.87 to $1.89
  • Introduced – Q2 FY16 earnings per share:
    • GAAP EPS in the range of $0.37 to $0.38
    • Non-GAAP EPS in the range of $0.38 to $0.39
  • Capital expenditures of approximately $1.4 billion

Company Updates

  • The company elected Mary Dillon, CEO of Ulta Beauty, to its Board of Directors on January 4; she will serve on the Board’s Compensation and Management Development Committee.
  • Starbucks and long-time strategic partner Hong Kong Maxim’s Group together opened the first Starbucks store in Cambodia in Q1; the company also opened its first two locations in Kazakhstan in the quarter, in collaboration with strategic licensing partner Alshaya. The company now operates in 70 countries worldwide.
  • In December, the company launched Starbucks Delivery by Postmates, a pilot program in collaboration with leading on-demand delivery service Postmates, where customers can have Starbucks food or beverages delivered to them within designated areas in Seattle.
  • Starbucks extended its successful Mobile Order & Pay program to Vancouver, B.C. in January, allowing customers to pre-order their favorite beverages and food in over 130 locations in the city.
  • The company announced a number of new market-leading initiatives in its China market – in addition to existing pay and benefits programs – including a monthly housing allowance subsidy and the Career Coffee Break (sabbatical) benefit.
  • Starbucks hosted the second “Opportunity Fair and Forum” in the quarter, together with the 100,000 Opportunities Initiative in Phoenix where more than 500 job offers were given to “opportunity youth” by the 25 companies in attendance. In addition, Starbucks Canada committed 10 percent of its store hires to opportunity youth and will further create 600 work placements for Non-Job-Ready Youth over the next three years.
  • The company announced an enhancement to its Starbucks College Achievement Plan whereby partners who are current or former members of the U.S. Armed Forces may extend 100 percent tuition reimbursement to a spouse or child through the program.
  • The company repurchased 4.5 million shares of common stock in Q1 FY16; 48 million shares remain available for purchase under current authorizations.
  • The Board of Directors declared a cash dividend of $0.20 per share, payable on February 19, 2016 to shareholders of record as of February 4, 2016.

Conference Call

Starbucks will hold a conference call today at 2:00 p.m. Pacific Time, which will be hosted by Howard Schultz, chairman and ceo; Kevin Johnson, president and coo; Scott Maw, cfo; and Michael Conway, president, Global Channel Development. The call will be webcast and can be accessed at http://investor.starbucks.com. A replay of the webcast will be available until end of day Saturday, February 20, 2016.

 

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