Strong Holiday Performance Drives 5% Global
Comp Growth, Global Traffic Increases 2%
Revenues rise 13% to a record $4.8 billion; EPS
of $1.30 includes a gain on the acquisition of Starbucks Japan
Record non-GAAP EPS jumps 16% to $0.80
excluding non-routine items
Dollars loaded on Starbucks Cards surge 17%
year-over-year to a record $1.6 billion
Company reaffirms FY15 growth targets
Starbucks Corporation (NASDAQ: SBUX) today reported financial
results for its 13-week fiscal first quarter ended
December 28, 2014. Q1 FY14 GAAP results include the impact of
a litigation credit related to the Kraft arbitration; Q1 FY15 GAAP
results include Starbucks Japan acquisition-related items. Non-GAAP
results exclude these items. Please refer to the reconciliation of
GAAP measures to non-GAAP measures at the end of this release.
Q1 Fiscal 2015 Highlights:
- Consolidated net revenues increased 13%
to $4.8 billion
- Global comparable store sales increased
5%, with a 2% increase in traffic
- Americas comp sales increased 5%, with
a 2% increase in traffic
- EMEA comp sales increased 4%, driven by
a 3% increase in traffic
- CAP comp sales increased 8%, driven
entirely by increased traffic
- Consolidated operating income reached a
record $915.5 million
- Non-GAAP operating income of $934.8
million grew 18% over Q1 FY14 non-GAAP operating income
- Consolidated operating margin of 19.1%
- Non-GAAP operating margin of 19.5%
increased 80 basis points over Q1 FY14 non-GAAP operating
margin
- GAAP earnings per share of $1.30
- Non-GAAP EPS of $0.80 per share grew
16% over Q1 FY14 non-GAAP EPS
- Comparable store customer transactions
increased by nearly 9 million in the U.S., nearly 12 million
globally, year-over-year
- The company opened 512 net new stores
in Q1, including its first Starbucks Reserve® Roastery and Tasting
Room
- Dollars loaded on Starbucks Cards
surged to a record $1.6 billion in the quarter, up 17% over prior
year Q1
- 1 in 7 Americans received a Starbucks
Gift Card in Q1, up from 1 in 8 in Q1 of fiscal 2014
- The company added 896,000 new My
Starbucks Rewards members in December and now has over 9 million
members
“Starbucks record Q1 fiscal 2015 financial and operating
performance was exceptional by every metric and standard,” said
Howard Schultz, chairman, president and ceo. “Our reimagined
in-store holiday experience that included a vastly expanded
assortment of Starbucks Cards, new holiday food, beverage and
merchandise offerings and the opportunity to win ‘Starbucks for
Life’ resonated powerfully with our customers and drove both
increased traffic and tremendous excitement in our stores and
around the Starbucks brand,” Schultz added.
“Starbucks results in the first quarter of fiscal 2015 were very
strong, with notable growth across the globe,” said Scott Maw,
Starbucks cfo. “All segments contributed to our record results in
the quarter, with improved traffic growth in the US, record
profitability in EMEA and 8% comps in CAP. Our continued ability to
drive growth through innovation, operational excellence and our
unique customer connection, along with our sharp focus on financial
discipline, give us confidence in reaffirming our growth targets
for fiscal 2015.”
First Quarter Fiscal 2015
Summary
Quarter Ended Dec 28,
2014 Comparable Store Sales(1)
Sales Growth Change in
Transactions Change in Ticket
Consolidated 5% 2% 3%
Americas 5% 2% 3% EMEA 4% 3% 1% CAP 8%
8% 0% (1) Includes only
Starbucks company-operated stores open 13 months or longer.
Operating Results Quarter Ended
($ in millions, except per share amounts)
Dec 28, 2014 Dec 29, 2013
Change Net New Stores 512
417 95 Revenues $4,803.2 $4,239.6 13% Operating Income
$915.5 $813.5 13% Operating Margin 19.1% 19.2% (10) bps EPS
$1.30 $0.71
83%
Consolidated net revenues were $4.8 billion in Q1 FY15, an
increase of 13% over Q1 FY14. The increase was primarily driven by
incremental revenues from the acquisition of Starbucks Japan, a 5%
increase in global comparable store sales and the opening of 1,641
net new stores over the past 12 months, and partially offset by
unfavorable foreign currency exchange.
Consolidated operating income of $915.5 million in Q1 FY15
increased 13% from $813.5 million in Q1 FY14. Consolidated
operating margin of 19.1% declined 10 basis points versus Q1 FY14.
The decline is due to the impact of our ownership change in
Starbucks Japan, which drove 80 basis points of margin decline. The
remaining margin expansion of 70 basis points was primarily due to
sales leverage, partially offset by the absence in the current
quarter of a prior year litigation credit related to the FY13
conclusion of the Kraft arbitration.
Q1 Americas Segment
Results
Quarter Ended ($ in millions)
Dec 28, 2014 Dec 29,
2013 Change Net New Stores 210
142 68 Revenues $3,366.9 $3,073.0 10%
Operating Income $817.5 $732.1 12% Operating Margin
24.3% 23.8% 50 bps
Net revenues for the Americas segment were $3.4 billion in Q1
FY15, an increase of 10% over Q1 FY14. The increase was driven by
5% growth in comparable store sales and incremental revenues from
766 net new store openings over the past 12 months.
Operating income of $817.5 million in Q1 FY15 increased 12% from
$732.1 million in the prior year quarter. Operating margin of 24.3%
expanded 50 basis points driven by sales leverage.
Q1 EMEA Segment Results
Quarter Ended ($ in millions)
Dec 28, 2014 Dec 29,
2013 Change Net New Stores 58
64 (6) Revenues $333.3 $339.5 (2)% Operating
Income $50.0 $33.5 49% Operating Margin 15.0%
9.9% 510 bps
Net revenues for the EMEA segment were $333.3 million in Q1
FY15, a decrease of 2% versus Q1 FY14. The decrease was primarily
due to unfavorable foreign currency exchange. Partially offsetting
the decrease were incremental revenues from a 4% increase in
comparable store sales and the opening of 184 net new licensed
stores over the past 12 months.
Operating income increased 49% to $50.0 million in Q1 FY15, up
from $33.5 million in Q1 FY14. Operating margin expanded 510 basis
points to 15.0%, primarily due to sales leverage and continued cost
management, driven by the shift in the portfolio towards more
licensed stores and other operational improvements.
Q1 China/Asia Pacific Segment
Results
Quarter Ended ($ in millions)
Dec 28, 2014 Dec 29,
2013 Change Net New Stores 234
209 25 Revenues $495.8 $266.9 86% Operating
Income $108.3 $81.1 34% Operating Margin 21.8%
30.4% (860) bps
Net revenues for the China/Asia Pacific segment grew 86% to
$495.8 million in Q1 FY15. The increase was primarily driven by
incremental revenues from the acquisition of Starbucks Japan. Also
contributing were incremental revenues from 767 net new store
openings over the past 12 months and an 8% increase in comparable
store sales.
Operating income grew to $108.3 million in Q1 FY15, an increase
of 34% compared to Q1 FY14. Operating margin declined 860 basis
points to 21.8% due to the impact of our ownership change in
Starbucks Japan, which drove a 1,060 basis point decline. The
remaining 200 basis point margin expansion was primarily driven by
sales leverage.
Q1 Channel Development Segment
Results
Quarter Ended ($ in millions)
Dec 28, 2014 Dec 29,
2013 Change Revenues $442.6
$401.0 10% Operating Income $157.5 $118.8 33%
Operating Margin 35.6%
29.6% 600 bps
Net revenues for the Channel Development segment grew 10% to
$442.6 million in Q1 FY15, primarily driven by increased sales of
premium single serve products and packaged coffee.
Operating income of $157.5 million in Q1 FY15 grew 33% compared
to Q1 FY14. Operating margin increased 600 basis points to 35.6% in
Q1 FY15, primarily due to lower coffee costs and efficiencies in
cost of goods sold.
Q1 All Other Segments
Results
Quarter Ended ($ in millions)
Dec 28, 2014 Dec 29,
2013 Change Net New Stores 10
2 8 Revenues $164.6 $159.2 3% Operating Income
$10.2 $13.6
(25)%
Fiscal 2015 Targets
The company provides the following fiscal 2015 targets.
Projected FY15 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.
The Company Reaffirms the Following Full Year
Targets:
- Revenue growth of 16% - 18%
- Global comparable store sales growth of
mid-single digits
- GAAP operating margin is expected to be
mildly dilutive versus FY14 due to the impact of our ownership
change in Starbucks Japan:
- Americas margin: modest improvement
over FY14
- EMEA margin: in the 10% - 12%
range
- China/Asia Pacific margin: in the high
teens
- Channel Development margin: modest
improvement over FY14
- Non-GAAP operating margin is expected
to be flat to slightly up over prior year non-GAAP operating
margin
- Consolidated tax rate of approximately
31%
- New store openings of 1,650 net new:
- Americas: approximately 650, half
licensed
- EMEA: approximately 150, primarily
licensed
- China/Asia Pacific: approximately 850,
two-thirds licensed
- Capital expenditures of approximately
$1.4 billion driven primarily by store investments, which include
new stores, Mobile Order and Pay and the evenings program
The Company Updates the Following Targets:
- Full year FY15 GAAP EPS is now expected
to be in the range of $3.53 to $3.58
- Q2 GAAP EPS is expected to be in the
range of $0.63 to $0.64
- Full Year FY15 non-GAAP EPS is now
expected to be in the range of $3.09 to $3.13
- Q2 non-GAAP EPS is expected to be in
the range of $0.64 to $0.65
Company Updates
- The company completed the first step of
its tender offer to acquire Starbucks Japan in the quarter,
bringing its total ownership of the market to a controlling 79%
interest in Q1. The company completed its second step in the tender
offer in Q2 bringing total ownership to 94% currently. The
transaction is expected to be fully complete in the first half of
calendar 2015, resulting in 100% ownership.
- Starbucks hosted its biennial Investor
Day in Seattle, Washington on Dec 4th, its first time in Seattle in
8 years. The company's business leaders provided an overview of
Starbucks 5-year strategic growth plan.
- The company launched Mobile Order and
Pay in Portland, Oregon in December and announced the rest of the
Pacific Northwest as its next market launch on its way towards a
national rollout in 2015. Mobile Order and Pay allows customers to
place orders in advance of their visit and pick them up at a
participating Starbucks® store.
- The first ever Starbucks Reserve®
Roastery and Tasting Room opened in Seattle in early December. The
company simultaneously announced plans to open 100 global Starbucks
Reserve®-only stores which will create a specialized store
experience devoted to highlighting its rare, limited availability
coffees.
- The company shipped nearly 100 million
Starbucks® Coffee K-Cup® packs in the month of December, the most
ever in a single month.
- In January, Starbucks chief operating
officer Troy Alstead announced that he would be taking a "Coffee
Break" or sabbatical, beginning in March, after a very successful
23-year career at Starbucks.
- The company repurchased nearly 3
million shares of common stock in Q1 FY15; 13 million shares remain
available for purchase under the current authorization.
- The Board of Directors declared a cash
dividend of $0.32 per share, payable on February 20, 2015 to
shareholders of record as of February 5, 2015.
Conference Call
Starbucks will be holding a conference call today at 2:00 p.m.
Pacific Time, which will be hosted by Howard Schultz, chairman,
president and ceo; and Scott Maw, cfo. The call will be webcast and
can be accessed at http://investor.starbucks.com. A replay of the
webcast will be available through approximately 9:00 p.m. Pacific
Time on Thursday, February 19, 2015.
The company’s consolidated statements of earnings, operating
segment results, and other additional information have been
provided on the following pages in accordance with current year
classifications. This information should be reviewed in conjunction
with this press release. Please refer to the company’s Annual
Report on Form 10-K for the fiscal year ended September 28,
2014 for additional information.
About Starbucks
Since 1971, Starbucks Coffee Company has been committed to
ethically sourcing and roasting high-quality arabica coffee. Today,
with stores around the globe, the company is the premier roaster
and retailer of specialty coffee in the world. Through our
unwavering commitment to excellence and our guiding principles, we
bring the unique Starbucks Experience to life for every customer
through every cup. To share in the experience, please visit us in
our stores or online at www.starbucks.com.
Forward-Looking
Statements
This release contains forward-looking statements relating to
certain company initiatives, strategies and plans, as well as
trends in or expectations regarding our diversified business model,
the strength, health and potential of our business, operations and
brand, our innovation, our ability to meet our targets, our ability
to leverage our assets, growth and growth opportunities and related
investments, earnings per share, revenues, operating margins,
profits, capital expenditures, tax rate, financial discipline,
anticipated gains and costs related to the acquisition of Starbucks
Japan, comparable store sales and net new stores. These
forward-looking statements are based on currently available
operating, financial and competitive information and are subject to
a number of significant risks and uncertainties. Actual future
results may differ materially depending on a variety of factors
including, but not limited to, fluctuations in U.S. and
international economies and currencies, our ability to preserve,
grow and leverage our brands, potential negative effects of
material breaches of our information technology systems if any were
to occur, costs associated with, and the successful execution of,
the company’s initiatives and plans, including the acquisition of
Starbucks Japan, the acceptance of the company’s products by our
customers, the impact of competition, coffee, dairy and other raw
material prices and availability, the effect of legal proceedings,
and other risks detailed in the company filings with the Securities
and Exchange Commission, including the “Risk Factors” section of
Starbucks Annual Report on Form 10-K for the fiscal year ended
September 28, 2014. The company assumes no obligation to
update any of these forward-looking statements.
STARBUCKS CORPORATION
CONSOLIDATED STATEMENTS OF
EARNINGS
(unaudited, in millions, except per share
data)
Quarter Ended Quarter Ended Dec 28,
2014 Dec 29, 2013
%
Change
Dec 28, 2014 Dec 29,
2013
As a % of total
net revenues
Net revenues: Company-operated stores $ 3,772.8 $ 3,343.8
12.8 % 78.5 % 78.9 % Licensed stores 483.9 401.8 20.4 10.1 9.5 CPG,
foodservice and other 546.5 494.0 10.6 11.4
11.7
Total net revenues 4,803.2 4,239.6
13.3 100.0 100.0 Cost of sales including
occupancy costs 1,991.2 1,795.1 10.9 41.5 42.3 Store operating
expenses 1,315.5 1,175.1 11.9 27.4 27.7 Other operating expenses
129.4 114.9 12.6 2.7 2.7 Depreciation and amortization expenses
206.0 169.7 21.4 4.3 4.0 General and administrative expenses 298.4
242.6 23.0 6.2 5.7 Litigation credit — (20.2 ) (100.0 ) —
(0.5 ) Total operating expenses 3,940.5 3,477.2 13.3 82.0
82.0 Income from equity investees 52.8 51.1 3.3 1.1
1.2
Operating income 915.5 813.5
12.5 19.1 19.2
Gain resulting from acquisition of joint
venture
390.6 — nm 8.1 — Interest income and other, net 9.7 19.8 (51.0 )
0.2 0.5 Interest expense (16.3 ) (14.5 ) 12.4 (0.3 ) (0.3 )
Earnings before income taxes 1,299.5 818.8 58.7 27.1 19.3 Income
taxes 315.0 278.1 13.3 6.6 6.6 Net
earnings including noncontrolling interests 984.5 540.7 82.1 20.5
12.8 Net earnings/(loss) attributable to noncontrolling interests
1.4 — nm — —
Net earnings
attributable to Starbucks $ 983.1 $
540.7 81.8 20.5 % 12.8
% Net earnings per common share - diluted
$ 1.30 $ 0.71 83.1
% Weighted avg. shares outstanding - diluted 758.4 766.2
Cash dividends declared per share $ 0.32 $ 0.26
Supplemental Ratios: Store operating expenses as a
percentage of company-operated store revenues 34.9 % 35.1 %
Effective tax rate including noncontrolling interests 24.2 % 34.0 %
Segment Results (in
millions)
Americas
Dec 28, 2014
Dec 29, 2013
%
Change
Dec 28, 2014 Dec 29,
2013
Quarter
Ended
As a % of Americas
total net revenues
Net revenues: Company-operated stores $
3,010.6 $ 2,787.0 8.0 % 89.4 % 90.7 % Licensed stores 346.2 274.3
26.2 10.3 8.9 Foodservice and other 10.1 11.7 (13.7 )
0.3 0.4
Total net revenues 3,366.9
3,073.0 9.6 100.0 100.0 Cost of sales
including occupancy costs 1,261.0 1,164.2 8.3 37.5 37.9 Store
operating expenses 1,084.4 999.6 8.5 32.2 32.5 Other operating
expenses 30.2 25.3 19.4 0.9 0.8 Depreciation and amortization
expenses 127.1 112.3 13.2 3.8 3.7 General and administrative
expenses 46.7 39.5 18.2 1.4 1.3 Total
operating expenses 2,549.4 2,340.9 8.9 75.7
76.2
Operating income $ 817.5
$ 732.1 11.7 % 24.3
% 23.8 % Supplemental Ratios: Store
operating expenses as a percentage of company-operated store
revenues 36.0 % 35.9 %
EMEA
Dec 28, 2014
Dec 29, 2013 %
Change
Dec 28, 2014 Dec 29,
2013
Quarter
Ended
As a % of EMEA
total net revenues
Net revenues: Company-operated stores $ 257.6
$ 269.0 (4.2 )% 77.3 % 79.2 % Licensed stores 63.3 60.6 4.5 19.0
17.8 Foodservice 12.4 9.9 25.3 3.7 2.9
Total net revenues 333.3 339.5 (1.8
) 100.0 100.0 Cost of sales including
occupancy costs 156.2 168.2 (7.1 ) 46.9 49.5 Store operating
expenses 85.8 96.4 (11.0 ) 25.7 28.4 Other operating expenses 13.7
11.6 18.1 4.1 3.4 Depreciation and amortization expenses 13.8 14.6
(5.5 ) 4.1 4.3 General and administrative expenses 14.0 16.0
(12.5 ) 4.2 4.7 Total operating expenses 283.5
306.8 (7.6 ) 85.1 90.4 Income from equity investees 0.2 0.8
(75.0 ) 0.1 0.2
Operating income
$ 50.0 $ 33.5 49.3
% 15.0 % 9.9 % Supplemental
Ratios: Store operating expenses as a percentage of
company-operated store revenues 33.3 % 35.8 %
China/Asia Pacific (CAP)
Dec 28, 2014
Dec 29, 2013 %
Change
Dec 28, 2014 Dec 29,
2013
Quarter
Ended
As a % of CAP
total net revenues
Net revenues: Company-operated stores $ 421.8
$ 201.6 109.2 % 85.1 % 75.5 % Licensed stores 73.2 65.3 12.1 14.8
24.5 Foodservice and other 0.8 — nm 0.2 —
Total net revenues 495.8 266.9
85.8 100.0 100.0 Cost of sales including
occupancy costs 233.6 132.7 76.0 47.1 49.7 Store operating expenses
117.7 51.3 129.4 23.7 19.2 Other operating expenses 15.1 10.6 42.5
3.0 4.0 Depreciation and amortization expenses 28.1 10.3 172.8 5.7
3.9 General and administrative expenses 25.7 14.0
83.6 5.2 5.2 Total operating expenses 420.2 218.9
92.0 84.8 82.0 Income from equity investees 32.7 33.1
(1.2 ) 6.6 12.4
Operating income $
108.3 $ 81.1 33.5
% 21.8 % 30.4 % Supplemental
Ratios: Store operating expenses as a percentage of
company-operated store revenues 27.9 % 25.4 %
Channel Development
Dec 28, 2014 Dec 29,
2013 %
Change
Dec 28, 2014 Dec 29,
2013
Quarter
Ended
As a % of
Channel Development
total net revenues
Net revenues: CPG $ 343.8 $ 306.4 12.2 % 77.7
% 76.4 % Foodservice 98.8 94.6 4.4 22.3 23.6
Total net revenues 442.6 401.0
10.4 100.0 100.0 Cost of sales 249.3 245.6 1.5
56.3 61.2 Other operating expenses 51.0 48.0 6.3 11.5 12.0
Depreciation and amortization expenses 0.6 0.4 50.0 0.1 0.1 General
and administrative expenses 4.1 5.4 (24.1 ) 0.9
1.3 Total operating expenses 305.0 299.4 1.9 68.9
74.7 Income from equity investees 19.9 17.2 15.7 4.5
4.3
Operating income $ 157.5
$ 118.8 32.6 %
35.6 % 29.6 %
All Other Segments
Dec 28,
2014 Dec 29,
2013 %
Change
Quarter
Ended
Net revenues: Company-operated stores $ 82.8 $ 86.2 (3.9 )%
Licensed stores 1.2 1.6 (25.0 ) CPG, foodservice and other 80.6
71.4 12.9
Total net revenues 164.6
159.2 3.4 Cost of sales including occupancy costs
93.3 82.8 12.7 Store operating expenses 27.6 27.8 (0.7 ) Other
operating expenses 19.5 19.6 (0.5 ) Depreciation and amortization
expenses 4.0 3.7 8.1 General and administrative expenses 10.0
11.7 (14.5 ) Total operating expenses 154.4
145.6 6.0
Operating income $ 10.2
$ 13.6 (25.0 )%
Supplemental
Information
The following supplemental information is provided for
historical and comparative purposes.
U.S. Supplemental Data
Quarter
Ended ($ in millions)
Dec 28, 2014 Dec 29, 2013
Change Revenues $3,022.0
$2,722.8 11% Comparable Store Sales Growth(1) 5% 5% Change in
Transactions 2% 4% Change in Ticket 4%
1% (1) Includes only
Starbucks company-operated stores open 13 months or longer
Store Data:
Net stores opened (closed) during the
period
Quarter Ended Stores open as of Dec 28,
2014 Dec 29, 2013 Dec
28, 2014 Dec 29, 2013
Americas Company-operated stores 67 27 8,462 8,105 Licensed stores
143 115 5,939 5,530 210 142
14,401 13,635 EMEA(1) Company-operated stores (7 ) 3 810 829
Licensed stores 65 61 1,388 1,204 58 64
2,198 2,033
CAP(2,3)
Company-operated stores 1,071 61 2,203 943 Licensed stores (837 )
148 2,655 3,148 234 209 4,858
4,091 All Other Segments Company-operated stores 9 7 378 364
Licensed stores 1 (5 ) 43 61 10 2 421
425
Total Company 512 417
21,878 20,184
(1) EMEA store data has been adjusted for the transfer of
certain company-operated stores to licensed stores in the second
and fourth quarters of fiscal 2014.
(2) CAP store data includes the transfer of 1,009 Japan stores
from licensed stores to company-operated as a result of the
acquisition of Starbucks Japan in the first quarter of fiscal
2015.
(3) CAP store data has been adjusted for the transfer of certain
company-operated stores to licensed stores in the fourth quarter of
fiscal 2014.
Non-GAAP Disclosure
In addition to the GAAP results provided in this release, the
company provides consolidated non-GAAP operating income, non-GAAP
operating margin and non-GAAP earnings per share (“non-GAAP EPS”)
for Q1 fiscal 2014 and fiscal 2015, consolidated non-GAAP EPS for
full year fiscal 2014, China/Asia Pacific (“CAP”) segment non-GAAP
operating income and non-GAAP operating margin for Q1 fiscal 2015,
and projected consolidated non-GAAP EPS for Q2 and full year fiscal
2015. These non-GAAP financial measures are not in accordance with,
or an alternative for, generally accepted accounting principles in
the United States. The GAAP measures most directly comparable to
non-GAAP operating income, non-GAAP operating margin, and non-GAAP
EPS are operating income, operating margin, and diluted net
earnings per share, respectively. The company’s management believes
that providing these non-GAAP financial measures better enables
investors to understand and evaluate the company’s historical and
prospective operating performance.
The consolidated Q1 and full year fiscal 2014 non-GAAP financial
measures provided in this release exclude the benefit recognized
from a Kraft related litigation credit in Q1 fiscal 2014. Full year
fiscal 2014 non-GAAP EPS also excludes the net benefit from
transactions in Q4 fiscal 2014. The net benefit from transactions
in Q4 fiscal 2014 includes a gain on the sale of our Malaysia
equity method investment, partially offset by a loss on the sale of
our Australia retail operations and transaction costs incurred
related to the acquisition of Starbucks Japan. Management excludes
these items because they believe the impacts do not reflect
expected future gains or expenses and do not contribute to a
meaningful evaluation of the company’s future operating performance
or comparisons to the company’s past operating performance.
The consolidated Q1 fiscal 2015 non-GAAP financial measures
exclude certain Starbucks Japan acquisition-related items,
specifically amortization expense from acquired intangible assets
and transaction and integration costs. Consolidated Q1 fiscal 2015
non-GAAP EPS also excludes a gain resulting from a fair value
adjustment of Starbucks preexisting 39.5% ownership interest in
Starbucks Japan. The Q1 fiscal 2015 CAP segment non-GAAP financial
measures exclude the amortization expense of acquired intangibles
assets related to the acquisition of Starbucks Japan. Management
excludes the acquisition-related gain and transaction costs
described above because they believe these items do not reflect
expected future gains and expenses and do not contribute to a
meaningful evaluation of the company’s future operating performance
or comparisons to the company’s past operating performance. In
addition, management believes it is useful to exclude the
integration costs and the amortization of the acquired intangible
assets when evaluating performance because they are not
representative of our core business operations. Although these
items will affect earnings per share beyond fiscal 2015, the
majority of these costs will be recognized over a finite period of
time. More specifically, the amounts of the acquired intangible
assets are specific to the transaction and the related amortization
is fixed at the time of acquisition and generally cannot
subsequently be changed or influenced by management in a future
period. Therefore, these items do not contribute to a meaningful
evaluation of the company’s fiscal 2015 operating performance or
comparisons of the company’s fiscal 2015 operating performance to
the company’s past operating performance or, with respect to the
CAP segment, to a meaningful evaluation of the CAP segment’s
operating performance or comparisons to the CAP segment’s past
operating performance.
The projected non-GAAP EPS for Q2 and full year fiscal 2015
exclude certain Starbucks Japan acquisition-related items comprised
of projected amortization expense from acquired intangible assets
and transaction and integration costs. The projected non-GAAP EPS
for full year fiscal 2015 also excludes the fair value gain in Q1.
Management is excluding these items from our projected non-GAAP
measures for the same reasons described above.
These non-GAAP financial measures may have limitations as
analytical tools, and these measures should not be considered in
isolation or as a substitute for analysis of the company’s results
as reported under GAAP. Other companies may calculate these
non-GAAP financial measures differently than the company does,
limiting the usefulness of those measures for comparative
purposes.
STARBUCKS CORPORATION
RECONCILIATION OF SELECTED GAAP
MEASURES TO NON-GAAP MEASURES
(unaudited)
Quarter Ended Dec 28, 2014
Dec 29, 2013
Change
Consolidated
Operating income, as reported (GAAP) $ 915.5 $ 813.5 12.5%
Litigation credit — (20.2 ) Starbucks Japan acquisition-related
items - other(1) 19.3 — Non-GAAP operating income $
934.8 $ 793.3 17.8% Operating margin, as
reported (GAAP) 19.1 % 19.2 % (10) bps Litigation credit — (0.5 )
Starbucks Japan acquisition-related items - other(1) 0.4 —
Non-GAAP operating margin 19.5 % 18.7 % 80bps Diluted
net earnings per share, as reported (GAAP) $ 1.30 $ 0.71 83.1%
Litigation credit — (0.02 ) Starbucks Japan acquisition-related
items - gain(2) (0.51 ) — Starbucks Japan acquisition-related items
- other(1) 0.02 — Non-GAAP net earnings per share $
0.80 $ 0.69 15.9%
China/Asia
Pacific (CAP)
Operating income, as reported (GAAP) $ 108.3 $ 81.1 33.5% Starbucks
Japan amortization expense of acquired intangibles 7.7 —
Non-GAAP operating income $ 116.0 $ 81.1 43.0%
Operating margin, as reported (GAAP) 21.8 % 30.4 % (860) bps
Starbucks Japan amortization expense of acquired intangibles 1.6
— Non-GAAP operating margin 23.4 % 30.4 % (700) bps
(1) Includes ongoing amortization expense of acquired intangible
assets and transaction and integration costs.
(2) Gain represents the fair value adjustment of Starbucks
preexisting 39.5% ownership interest in Starbucks Japan upon
acquisition.
Consolidated
Mar 29, 2015
Mar 30, 2014
Quarters
Ended
(Projected) (As Reported)
Change Diluted net earnings per
share (GAAP) $0.63 - $0.64 $ 0.56 13% - 14% Starbucks Japan
acquisition-related items - other(1) 0.01 - 0.01 — Non-GAAP
net earnings per share $0.64 - $0.65 $ 0.56 14% - 16%
Sep 27, 2015 Sep 28, 2014
Years
Ended
(Projected) (As Reported)
Change Diluted net earnings per
share (GAAP) $3.53 - $3.58 $ 2.71 30% - 32% Litigation credit —
(0.02 ) Net benefit from transactions in Q4 2014(2) — (0.03 )
Starbucks Japan acquisition-related items - gain(3) (0.51) - (0.51)
Starbucks Japan acquisition-related items - other(1) 0.07 - 0.06 —
Non-GAAP net earnings per share $3.09 - $3.13 $ 2.66
16% - 18%
(1) Includes ongoing amortization expense of acquired intangible
assets and transaction and integration costs.
(2) The net benefit from transactions in Q4 2014 relates
primarily to a $0.05 gain on the sale of our Malaysia equity method
investment, partially offset by a loss on the sale of our Australia
retail operations and transaction costs incurred in Q4 FY14 related
to the acquisition of Starbucks Japan.
(3) Gain represents the fair value adjustment of Starbucks
preexisting 39.5% ownership interest in Starbucks Japan upon
acquisition.
Starbucks Contact, Investor Relations:JoAnn DeGrande,
206-318-7118investorrelations@starbucks.comorStarbucks Contact,
Media:Alisha Damodaran, 206-318-7100press@starbucks.com
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