We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Starbucks (SBUX) Q1 Earnings Beat, Revenues Miss Estimates
Read MoreHide Full Article
Starbucks Corporation (SBUX - Free Report) reported first-quarter fiscal 2021 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Notably, the bottom line surpassed the Zacks Consensus Estimate for the fifth straight quarter. However, the top line missed the consensus mark after outpacing the same in the trailing three quarters.
However, both the metrics declined sharply year over year due to the coronavirus pandemic. Despite reporting better-than-expected results, the company’s shares declined 1.7% in after-hour trading session as earnings estimates for second-quarter fiscal 2021 were below analyst estimates.
Kevin Johnson, president and CEO said “I am very pleased with our start to fiscal 2021, with meaningful, sequential improvements in quarterly financial results despite ongoing business disruption from the pandemic. Investments in our partners, beverage innovation and digital customer relationships continued to fuel our recovery and position Starbucks for long-term, sustainable growth.”
Discussion on Earnings, Revenues & Comps
In the quarter under review, the company reported adjusted earnings per share of 61 cents, which beat the Zacks Consensus Estimate of 55 cents. In the prior-year quarter, the company had reported adjusted earnings per share of 79 cents.
Total revenues were $6,749.4 million, which missed the Zacks Consensus Estimate of $6,873 million. However, the top line fell 4.9% from the year-ago quarter. The downside was due to dismal global retail and comparable sales, and decline in store traffic.
Global comparable store sales fell 5% compared with a decline of 9% in fourth-quarter fiscal 2020. Global comps declined due to 19% fall in comparable transactions, marginally offset by 17% increase in average ticket.
Starbucks opened 279 net new stores worldwide in the fiscal first quarter, bringing the total store count to 32,938. Global store growth came in at 4% on a year-over-year basis.
Starbucks Corporation Price, Consensus and EPS Surprise
On a non-GAAP basis, operating margin came in at 15.5% compared with 18.2% in the prior-year quarter. The downtrend can be attributed to sales deleverage, growth in wages and Americas store portfolio optimization expenses.
Segmental Performance
In fourth-quarter fiscal 2019, the company realigned its operating segments. Specifically, the China/Asia Pacific segment and Europe, Middle East and Africa segment have been combined into one International segment.
Results of Siren Retail — which is a non-reportable operating segment consisting of Starbucks Reserve TM Roastery & Tasting Rooms, Starbucks Reserve brand and Princi operations — were previously included within Corporate and Other. It now reports within Americas and International segments based on the geographical location of operations.
Americas: Net revenues in this flagship segment were $4,703.2 million, down 6% year over year. Although the segment revenues in the quarter under review benefited from 105 net new store openings in a year’s time, it was offset by 6% comparable store sales decline, and decrease in product sales and royalty revenues from its licensees due to the coronavirus outbreak.
Operating margin in the Americas segment contracted to 17.3%, down 460 basis points year over year. The downtrend can primarily be attributed to increase in expenses owing to Americas store portfolio optimization, sales deleverage and additional costs incurred due to the pandemic and increase in retail partner benefits and wages.
International: Net revenues rose 5% year over year to $1,654.3 million in the segment, copurtesy of 1,038 net new store openings over the past 12 months. The gain was primarily overshadowed by decline in product sales and royalty revenues from the company’s international licensees. International comparable store sales declined 3% in the quarter due to the coronavirus pandemic.
Adjusted operating margin in the segment fell to 16.6% from 17.6% in the year-ago quarter owing to sales deleverage.
Comps in China increased 5%, driven by 9% increase in average ticket. The gain was partially overshadowed by 3% decline in transactions.
Channel Development: Net revenues in the segment declined 25% from the prior-year quarter’s figure to $371.4 million. The decline was primarily due to nearly 22% unfavorable impact of Global Coffee Alliance transition-related activities, which includes structural change in its single-serve business and negative impact of COVID-19 on the Foodservice business. Moreover, operating margin expanded 1,320 basis points to 48.7%.
Guidance
The company updated fiscal 2021 GAAP earnings guidance. Management noted that fiscal year 2021 is a 53-week year instead of the normal 52 weeks. The company continues to anticipate global comparable sales to increase between 18% and 23% in fiscal 2021. Moreover, the company continues to anticipate Americas and U.S. comparable store sales to improve in the range of 17% to 22% in fiscal 2021. International comps for the fiscal 2021 are expected in the band of 25% to 30%. The company anticipates China comparable store sales growth to be 27-32%.
The company continues to expect to open nearly 2,150 (850 stores in Americas and 1,300 internationally) news stores and 1,100 (50 stores in Americas and 1,050 in internationally) net new stores worldwide in fiscal 2021. In China, the company anticipates to open 600 net new stores.
The company projects consolidated revenues in the range of $28 billion to $29 billion, inclusive of a $500 million impact attributable to the 53rd week. Channel development revenues are expected in the range of $1.4 billion to $1.6 billion. Moreover, adjusted operating margin expected between 16% and 17%.
Moreover, for full-year earnings is expected in the range of $2.70 to $2.90. The Zacks Consensus Estimate for fiscal 2021 earnings currently stands at $2.80. However, the company expects GAAP earnings in the range of $2.42 to $2.62, down from the prior estimate of $2.34 to $2.54.
Non-GAAP earnings for the fiscal second quarter are anticipated to be 45-50 cents. The Zacks Consensus Estimate for the fiscal second-quarter earnings is currently pegged at 59 cents. In second quarter fiscal 2021, the company expects comparable sales growth in the range of 5% to 10%.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $5,028.1 million compared with $4,350.9 million at the end of Sep 27, 2020. As of Dec 27, 2020, long-term debt is at $14,673.5 million compared with $14,659.6 million as of Sep 27, 2020.
Zacks Rank & Key Picks
Starbucks, which shares space with McDonald's Corporation (MCD - Free Report) , has a Zacks Rank #3 (Hold).
Yum! Brands have an impressive long-term earnings growth rate of 12.3%.
Jack in the Box fiscal 2021 earnings are expected to witness growth of 20.4%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
Image: Bigstock
Starbucks (SBUX) Q1 Earnings Beat, Revenues Miss Estimates
Starbucks Corporation (SBUX - Free Report) reported first-quarter fiscal 2021 results, wherein earnings beat the Zacks Consensus Estimate but revenues missed the same. Notably, the bottom line surpassed the Zacks Consensus Estimate for the fifth straight quarter. However, the top line missed the consensus mark after outpacing the same in the trailing three quarters.
However, both the metrics declined sharply year over year due to the coronavirus pandemic. Despite reporting better-than-expected results, the company’s shares declined 1.7% in after-hour trading session as earnings estimates for second-quarter fiscal 2021 were below analyst estimates.
Kevin Johnson, president and CEO said “I am very pleased with our start to fiscal 2021, with meaningful, sequential improvements in quarterly financial results despite ongoing business disruption from the pandemic. Investments in our partners, beverage innovation and digital customer relationships continued to fuel our recovery and position Starbucks for long-term, sustainable growth.”
Discussion on Earnings, Revenues & Comps
In the quarter under review, the company reported adjusted earnings per share of 61 cents, which beat the Zacks Consensus Estimate of 55 cents. In the prior-year quarter, the company had reported adjusted earnings per share of 79 cents.
Total revenues were $6,749.4 million, which missed the Zacks Consensus Estimate of $6,873 million. However, the top line fell 4.9% from the year-ago quarter. The downside was due to dismal global retail and comparable sales, and decline in store traffic.
Global comparable store sales fell 5% compared with a decline of 9% in fourth-quarter fiscal 2020. Global comps declined due to 19% fall in comparable transactions, marginally offset by 17% increase in average ticket.
Starbucks opened 279 net new stores worldwide in the fiscal first quarter, bringing the total store count to 32,938. Global store growth came in at 4% on a year-over-year basis.
Starbucks Corporation Price, Consensus and EPS Surprise
Starbucks Corporation price-consensus-eps-surprise-chart | Starbucks Corporation Quote
Overall Margin Contracts in Q1
On a non-GAAP basis, operating margin came in at 15.5% compared with 18.2% in the prior-year quarter. The downtrend can be attributed to sales deleverage, growth in wages and Americas store portfolio optimization expenses.
Segmental Performance
In fourth-quarter fiscal 2019, the company realigned its operating segments. Specifically, the China/Asia Pacific segment and Europe, Middle East and Africa segment have been combined into one International segment.
Results of Siren Retail — which is a non-reportable operating segment consisting of Starbucks Reserve TM Roastery & Tasting Rooms, Starbucks Reserve brand and Princi operations — were previously included within Corporate and Other. It now reports within Americas and International segments based on the geographical location of operations.
Americas: Net revenues in this flagship segment were $4,703.2 million, down 6% year over year. Although the segment revenues in the quarter under review benefited from 105 net new store openings in a year’s time, it was offset by 6% comparable store sales decline, and decrease in product sales and royalty revenues from its licensees due to the coronavirus outbreak.
Operating margin in the Americas segment contracted to 17.3%, down 460 basis points year over year. The downtrend can primarily be attributed to increase in expenses owing to Americas store portfolio optimization, sales deleverage and additional costs incurred due to the pandemic and increase in retail partner benefits and wages.
International: Net revenues rose 5% year over year to $1,654.3 million in the segment, copurtesy of 1,038 net new store openings over the past 12 months. The gain was primarily overshadowed by decline in product sales and royalty revenues from the company’s international licensees. International comparable store sales declined 3% in the quarter due to the coronavirus pandemic.
Adjusted operating margin in the segment fell to 16.6% from 17.6% in the year-ago quarter owing to sales deleverage.
Comps in China increased 5%, driven by 9% increase in average ticket. The gain was partially overshadowed by 3% decline in transactions.
Channel Development: Net revenues in the segment declined 25% from the prior-year quarter’s figure to $371.4 million. The decline was primarily due to nearly 22% unfavorable impact of Global Coffee Alliance transition-related activities, which includes structural change in its single-serve business and negative impact of COVID-19 on the Foodservice business. Moreover, operating margin expanded 1,320 basis points to 48.7%.
Guidance
The company updated fiscal 2021 GAAP earnings guidance. Management noted that fiscal year 2021 is a 53-week year instead of the normal 52 weeks. The company continues to anticipate global comparable sales to increase between 18% and 23% in fiscal 2021. Moreover, the company continues to anticipate Americas and U.S. comparable store sales to improve in the range of 17% to 22% in fiscal 2021. International comps for the fiscal 2021 are expected in the band of 25% to 30%. The company anticipates China comparable store sales growth to be 27-32%.
The company continues to expect to open nearly 2,150 (850 stores in Americas and 1,300 internationally) news stores and 1,100 (50 stores in Americas and 1,050 in internationally) net new stores worldwide in fiscal 2021. In China, the company anticipates to open 600 net new stores.
The company projects consolidated revenues in the range of $28 billion to $29 billion, inclusive of a $500 million impact attributable to the 53rd week. Channel development revenues are expected in the range of $1.4 billion to $1.6 billion. Moreover, adjusted operating margin expected between 16% and 17%.
Moreover, for full-year earnings is expected in the range of $2.70 to $2.90. The Zacks Consensus Estimate for fiscal 2021 earnings currently stands at $2.80. However, the company expects GAAP earnings in the range of $2.42 to $2.62, down from the prior estimate of $2.34 to $2.54.
Non-GAAP earnings for the fiscal second quarter are anticipated to be 45-50 cents. The Zacks Consensus Estimate for the fiscal second-quarter earnings is currently pegged at 59 cents. In second quarter fiscal 2021, the company expects comparable sales growth in the range of 5% to 10%.
Other Financial Updates
The company ended the quarter with cash and cash equivalents of $5,028.1 million compared with $4,350.9 million at the end of Sep 27, 2020. As of Dec 27, 2020, long-term debt is at $14,673.5 million compared with $14,659.6 million as of Sep 27, 2020.
Zacks Rank & Key Picks
Starbucks, which shares space with McDonald's Corporation (MCD - Free Report) , has a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering in the same space include Yum! Brands, Inc. (YUM - Free Report) and Jack in the Box Inc. (JACK - Free Report) . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Yum! Brands have an impressive long-term earnings growth rate of 12.3%.
Jack in the Box fiscal 2021 earnings are expected to witness growth of 20.4%.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>