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Starbucks reports 4Q profit of $392.6m (-51%), comparable store sales are down 9%

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MILAN – Starbucks Corporation on Thursday reported financial results for its 13-week fiscal fourth quarter ended September 27, 2020. Global comparable store sales declined 9% in Q4, driven by a 23% decrease in comparable transactions, partially offset by a 17% increase in average ticket. Wall Street had estimated a 12.1%. The coffee chain posted revenue of $6.2 billion in the period, which also beat Street forecasts. Ten analysts surveyed by Zacks expected $6.08 billion. Net income in fiscal fourth-quarter reached $392.6 million, down 51.1% on year. On a per-share basis, the Seattle-based company said it had profit of 33 cents. Earnings, adjusted for non-recurring costs, were 51 cents per share.

“I am very pleased with our strong finish to fiscal 2020, underpinned by a faster-than-expected recovery in our two lead growth markets, the U.S. and China. These results demonstrate the continued strength and relevance of our brand, the effectiveness of the actions we’ve taken to adapt to meaningful changes in consumer behavior and the extraordinary efforts of our green apron partners to serve our customers and communities in challenging circumstances,” said Kevin Johnson, president and ceo.

“The guiding principles we established at the onset of the pandemic, combined with our industry-leading digital platform and our ability to innovate rapidly, continue to fuel our recovery and provide confidence in a robust operating outlook for fiscal 2021. Our strategies are working and I am optimistic that we will emerge from the COVID-19 pandemic as a stronger and more resilient company,” concluded Johnson.

Starbucks: Q4 Fiscal 2020 Highlights

  • Global comparable store sales declined 9%, driven by a 23% decrease in comparable transactions, partially offset by a 17% increase in average ticket
    • Americas and U.S. comparable store sales declined 9%, driven by a 25% decrease in comparable transactions, partially offset by a 21% increase in average ticket
    • International comparable store sales were down 10%, driven by a 15% decline in comparable transactions, partially offset by a 7% increase in average ticket; China comparable store sales were down 3%, with comparable transactions down 7%, partially offset by a 5% increase in average ticket; International and China comparable store sales are inclusive of a benefit from value-added tax exemptions of approximately 2% and 4%, respectively
  • The company opened 480 net new stores in Q4, yielding 4% year-over-year unit growth, ending the period with 32,660 stores globally, of which 51% and 49% were company-operated and licensed, respectively
    • Stores in the U.S. and China comprised 61% of the company’s global portfolio at the end of Q4, with 15,337 and 4,706 stores, respectively
  • Consolidated net revenues of $6.2 billion declined 8% from the prior year primarily due to lost sales related to the COVID-19 outbreak
    • Lost sales of approximately $1.2 billion relative to the company’s expectations before the outbreak included the effects of modified operations, reduced hours, reduced customer traffic and temporary store closures
  • GAAP operating margin of 9.0%, down from 16.1% in the prior year primarily due to the COVID-19 outbreak, mainly sales deleverage, material investments in retail partner support and other items; GAAP operating margin was also adversely impacted by the Americas store portfolio optimization expenses
    • Non-GAAP operating margin of 13.2%, down from 17.2% in the prior year
  • GAAP earnings per share of $0.33, down from $0.67 in the prior year primarily due to unfavorable impacts related to the COVID-19 outbreak totaling approximately -$0.35 per share
    • Non-GAAP earnings per share of $0.51, down from $0.70 in the prior year
  • Starbucks Rewards loyalty program 90-day active members in the U.S. increased to 19.3 million, up 10% year-over-year

Starbucks: Full Year Fiscal 2020 Highlights

  • Global comparable store sales declined 14%, driven by a 22% decrease in comparable transactions, partially offset by a 10% increase in average ticket
    • Americas and U.S. comparable store sales declined 12%, driven by a 21% decrease in comparable transactions, partially offset by an 11% increase in average ticket
    • International comparable store sales were down 19%, driven by a 23% decline in comparable transactions, partially offset by a 5% increase in average ticket; China comparable store sales declined 17%, driven by a 21% decrease in comparable transactions, slightly offset by a 5% increase in average ticket; International and China comparable store sales are inclusive of a benefit from value-added tax exemptions of approximately 1% and 2%, respectively
  • Consolidated net revenues of $23.5 billion declined 11.3% from the prior year primarily due to lost sales related to the COVID-19 outbreak
    • Lost sales of approximately $5.1 billion relative to the company’s expectations before the outbreak included the effects of temporary store closures, modified operations, reduced hours and reduced customer traffic(1)
  • GAAP operating margin of 6.6%, down from 15.4% in the prior year primarily due to the COVID-19 outbreak, mainly sales deleverage, material investments in retail partner support and other items
    • Non-GAAP operating margin of 9.1%, down from 17.2% in the prior year
  • GAAP earnings per share of $0.79, down from $2.92 in the prior year primarily due to unfavorable impacts related to the COVID-19 outbreak totaling approximately -$2.01 per share
    • Non-GAAP earnings per share of $1.17, down from $2.83 in the prior year.

Fiscal 2021 Guidance

The company introduces the following fiscal 2021 guidance for Q1 and the full year. Please note that Starbucks fiscal year 2021 is a 53-week year instead of the usual 52 weeks. The impact of the 53rd week will be reflected in our results for the fourth quarter of fiscal 2021. All full-year guidance for the metrics noted below is for fiscal year 2021 on a 53-week basis except comparable store sales growth metrics, which are relative to fiscal year 2020 on a 52-week basis.

  • Global comparable store sales growth of 18% to 23%
  • Americas and U.S. comparable store sales growth of 17% to 22%
  • International comparable store sales growth of 25% to 30%
    • China comparable store sales growth of 27% to 32%
  • Approximately 2,150 new store openings and 1,100 net new Starbucks stores globally
    • Americas approximately 850 new store openings and approximately 50 net new stores
    • International approximately 1,300 new store openings and 1,050 net new stores
      • Approximately 600 net new stores in China
  • Consolidated revenue of $28.0 billion to $29.0 billion, inclusive of a $500 million impact attributable to the 53rd week
    • Channel Development revenue of $1.4 billion to $1.6 billion
  • Consolidated GAAP operating margin of 14% to 15%
    • Consolidated Non-GAAP operating margin of 16% to 17%
  • Interest expense of approximately $470 million to $480 million
  • GAAP and non-GAAP effective tax rates in the mid-20%s
  • GAAP EPS in the range of $0.32 to $0.37 for Q1 and $2.34 to $2.54 for full year, inclusive of a $0.10 impact attributable to the 53rd week
    • Non-GAAP EPS in the range of $0.50 to $0.55 for Q1 and $2.70 to $2.90 for full year, inclusive of a $0.10 impact attributable to the 53rd week
  • Capital expenditures of approximately $1.9 billion