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 Miss Estimates, Revenues Top
Read MoreHide Full Article
Starbucks Corporation (SBUX - Free Report) reported mixed first-quarter fiscal 2022 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. However, the metrics increased on a year-over-year basis.
Following the results, the company’s shares dropped 0.7% in the after-hour trading session on Feb 1. Investor sentiments were hurt as the company cited concerns related to higher-than-expected inflationary pressures, increased costs due to Omicron and a tight labor market.
Nevertheless, Kevin Johnson, president and CEO, stated, “Starbucks will continue to proactively address the industry challenges and operating environment while maintaining our focus on Starbucks partners and customers. Our brand is more resilient than ever as we navigate the future of Starbucks together.”
Discussion on Earnings, Revenues & Comps
In the quarter under review, the company reported adjusted earnings per share (EPS) of 72 cents, missing the Zacks Consensus Estimate of 80 cents by 10%. However, the bottom line increased 18% year over year from an adjusted EPS of 61 cents reported in the prior-year quarter.
Starbucks Corporation Price, Consensus and EPS Surprise
Quarterly revenues of $8,050.4 million beat the Zacks Consensus Estimate of $8,004 million by 0.6%. The top line increased 19.3% on a year-over-year basis. The upside was primarily driven by growth in comparable-store sales backed by the lapping of business disruption in the prior year due to the COVID-19 pandemic. Also, the solid performance of new U.S. company-operated stores (part of the North America Trade Area Transformation initiative) added to the positives.
Global comparable store sales increased 13% year over year. The upside was primarily driven by a 10% rise in comparable transactions and a 6% increase in average ticket.
Starbucks opened 484 net new stores worldwide in the fiscal first quarter, bringing the total store count to 34,317. Global store growth came in at 4% on a year-over-year basis.
Overall Margin Falls in Q1
On a non-GAAP basis, the operating margin during the fiscal first quarter came in at 15.1%, down from 15.4% reported in the prior-year quarter. The downside was primarily caused by inflationary pressures along with increased investments in store partner wages and benefits. However, this was partially offset by benefits from sales leverage and pricing in North America.
Segmental Details
Starbucks has three reportable operating segments: North America, International and Channel Development.
North America: The segment’s fiscal first-quarter net revenues came in at $5,732.3 million, up 23% year over year. The segment benefited from an 18% growth in comparable-store sales.
Operating margin in the North America segment came in at 18.9% compared with 17.2% reported in the prior-year quarter. The uptrend was driven by sales leverage from business recovery and pricing coupled with savings and benefits of North America Trade Area Transformation and closure of underperforming stores. However, this was partly negated by a rise in supply chain costs (on account of inflationary pressures and higher spending on new partner training) and investments in retail store partner wages.
International: Net revenues in the segment rose 12% year over year to $1,875.9 million. The upside was primarily driven by 1,381 net new store openings (in the past 12 months), higher product sales and royalty revenues (with reference to its licensees) and conversion of the Korea market to a fully-licensed business. International comparable-store sales fell 3% year over year. The downside was mainly due to the lapping of prior year’s VAT benefit in China and the unfavorable impact from foreign currency translation.
Operating margin in the segment contracted 80 basis points (bps) year over year to 16%. The downside can be attributed to investments in strategic initiatives, store partner wages and benefits as well as higher profit and distribution costs from a sales mix shift. However, this was partially offset by benefits from sales leverage.
During the fiscal first quarter, comps in China declined 14% year over year against a 5% growth reported in the prior-year quarter. The downtick was caused by a 9% decline in average tickets and a 6% fall in transactions.
Channel Development: Net revenues in the segment increased 12% from the prior-year quarter’s figure to $417.1 million. The upside was primarily driven by growth in its ready-to-drink business and Global Coffee Alliance. The segments operating income increased 1% year over year to $183.2 million.
However, the operating margin in the segment contracted 480 bps year over year to 43.9%. The decline was mainly due to a fall in income from the North American Coffee Partnership joint venture, primarily on account of supply chain constraints, inflationary pressures and a business mix shift.
Financial Details
The company ended the quarter with cash and cash equivalents of $3,969.4 million compared with $6,455.7 million at the end of Oct 3, 2021. As of Jan 2, 2022, long-term debt totaled $13,586.3 million compared with $13,616.9 million as of Oct 3, 2021.
During the first quarter of fiscal 2022, Starbucks’ board of directors repurchased 31.1 million shares of its common stock. At the end of fiscal first-quarter, SBUX had approximately 17.8 million shares remaining under its repurchase authorization.
Meanwhile, the company declared a quarterly cash dividend of 49 cents per share. The dividend will be payable on Feb 25, 2022, to shareholders of record as of Feb 11, 2022.
Other Updates
During the fiscal first quarter, Starbucks Pickup and Amazon Go collaborated to launch a new store concept in New York City. The initiative involves combining the order ahead feature in the Starbucks app and Amazon Go’s Just Walk Out technology, thereby emphasizing an easy checkout experience for its customers. The new store offerings comprises of Starbucks menu and a curated assortment of food and beverages in the Amazon Go market, including fresh-prepared salads, sandwiches, bakery items and snack options.
In January 2022, the company initiated its mobile order and delivery service — Starbucks Delivers — on Meituan platforms. Focused on customers in China, the expanded features include beverage customizations, smart technology that automatically reallocates orders to other stores when products are sold out along with the delivery debut of Starbucks Reserve. The company stated that Starbucks Rewards members can enjoy the same benefits as using the Starbucks China app.
The company also unveiled its first energy drink Starbucks BAYATM. Made with caffeine, the item will join the Starbucks bottled and canned beverage portfolio. The company stated its availability in fruit flavors, including Mango Guava, Raspberry Lime and Pineapple Passionfruit.
Fiscal 2022 Guidance
For fiscal 2022, the company anticipates global comparable sales to reach high-single digits. The company expects to open approximately 2,000 net new stores globally in fiscal 2022, up from 1,173 store openings reported in fiscal 2021.
Consolidated revenues for fiscal 2022 are anticipated between $32.5 billion and $33 billion.
For fiscal 2022, the company anticipates non-GAAP EPS growth in the range of 8-10% from the base of $3.10 in fiscal 2021 (the figure is adjusted for non-GAAP treatment of certain integration costs and excludes the involvement of an extra week).
MarineMax sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 55.8%, on average. Shares of the company have increased 12.3% in the past year.
The Zacks Consensus Estimate for MarineMax’s 2022 sales and EPS suggests growth of 11.8% and 16.2%, respectively, from the year-ago period’s levels.
Arcos Dorados flaunts a Zacks Rank #1. ARCO has a long-term earnings growth of 42.9%. Shares of the company have increased 35.5% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 10.4% and 255.6%, respectively, from the year-ago period’s levels.
Tapestry carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 29%, on average. Shares of the company have increased 12% in the past year.
The Zacks Consensus Estimate for Tapestry’s 2022 sales and EPS suggests growth of 14.9% and 18.2%, respectively, from the year-ago period’s levels.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Starbucks (SBUX) Q1 Earnings Miss Estimates, Revenues Top
Starbucks Corporation (SBUX - Free Report) reported mixed first-quarter fiscal 2022 results, with earnings missing the Zacks Consensus Estimate and revenues beating the same. However, the metrics increased on a year-over-year basis.
Following the results, the company’s shares dropped 0.7% in the after-hour trading session on Feb 1. Investor sentiments were hurt as the company cited concerns related to higher-than-expected inflationary pressures, increased costs due to Omicron and a tight labor market.
Nevertheless, Kevin Johnson, president and CEO, stated, “Starbucks will continue to proactively address the industry challenges and operating environment while maintaining our focus on Starbucks partners and customers. Our brand is more resilient than ever as we navigate the future of Starbucks together.”
Discussion on Earnings, Revenues & Comps
In the quarter under review, the company reported adjusted earnings per share (EPS) of 72 cents, missing the Zacks Consensus Estimate of 80 cents by 10%. However, the bottom line increased 18% year over year from an adjusted EPS of 61 cents reported in the prior-year quarter.
Starbucks Corporation Price, Consensus and EPS Surprise
Starbucks Corporation price-consensus-eps-surprise-chart | Starbucks Corporation Quote
Quarterly revenues of $8,050.4 million beat the Zacks Consensus Estimate of $8,004 million by 0.6%. The top line increased 19.3% on a year-over-year basis. The upside was primarily driven by growth in comparable-store sales backed by the lapping of business disruption in the prior year due to the COVID-19 pandemic. Also, the solid performance of new U.S. company-operated stores (part of the North America Trade Area Transformation initiative) added to the positives.
Global comparable store sales increased 13% year over year. The upside was primarily driven by a 10% rise in comparable transactions and a 6% increase in average ticket.
Starbucks opened 484 net new stores worldwide in the fiscal first quarter, bringing the total store count to 34,317. Global store growth came in at 4% on a year-over-year basis.
Overall Margin Falls in Q1
On a non-GAAP basis, the operating margin during the fiscal first quarter came in at 15.1%, down from 15.4% reported in the prior-year quarter. The downside was primarily caused by inflationary pressures along with increased investments in store partner wages and benefits. However, this was partially offset by benefits from sales leverage and pricing in North America.
Segmental Details
Starbucks has three reportable operating segments: North America, International and Channel Development.
North America: The segment’s fiscal first-quarter net revenues came in at $5,732.3 million, up 23% year over year. The segment benefited from an 18% growth in comparable-store sales.
Operating margin in the North America segment came in at 18.9% compared with 17.2% reported in the prior-year quarter. The uptrend was driven by sales leverage from business recovery and pricing coupled with savings and benefits of North America Trade Area Transformation and closure of underperforming stores. However, this was partly negated by a rise in supply chain costs (on account of inflationary pressures and higher spending on new partner training) and investments in retail store partner wages.
International: Net revenues in the segment rose 12% year over year to $1,875.9 million. The upside was primarily driven by 1,381 net new store openings (in the past 12 months), higher product sales and royalty revenues (with reference to its licensees) and conversion of the Korea market to a fully-licensed business. International comparable-store sales fell 3% year over year. The downside was mainly due to the lapping of prior year’s VAT benefit in China and the unfavorable impact from foreign currency translation.
Operating margin in the segment contracted 80 basis points (bps) year over year to 16%. The downside can be attributed to investments in strategic initiatives, store partner wages and benefits as well as higher profit and distribution costs from a sales mix shift. However, this was partially offset by benefits from sales leverage.
During the fiscal first quarter, comps in China declined 14% year over year against a 5% growth reported in the prior-year quarter. The downtick was caused by a 9% decline in average tickets and a 6% fall in transactions.
Channel Development: Net revenues in the segment increased 12% from the prior-year quarter’s figure to $417.1 million. The upside was primarily driven by growth in its ready-to-drink business and Global Coffee Alliance. The segments operating income increased 1% year over year to $183.2 million.
However, the operating margin in the segment contracted 480 bps year over year to 43.9%. The decline was mainly due to a fall in income from the North American Coffee Partnership joint venture, primarily on account of supply chain constraints, inflationary pressures and a business mix shift.
Financial Details
The company ended the quarter with cash and cash equivalents of $3,969.4 million compared with $6,455.7 million at the end of Oct 3, 2021. As of Jan 2, 2022, long-term debt totaled $13,586.3 million compared with $13,616.9 million as of Oct 3, 2021.
During the first quarter of fiscal 2022, Starbucks’ board of directors repurchased 31.1 million shares of its common stock. At the end of fiscal first-quarter, SBUX had approximately 17.8 million shares remaining under its repurchase authorization.
Meanwhile, the company declared a quarterly cash dividend of 49 cents per share. The dividend will be payable on Feb 25, 2022, to shareholders of record as of Feb 11, 2022.
Other Updates
During the fiscal first quarter, Starbucks Pickup and Amazon Go collaborated to launch a new store concept in New York City. The initiative involves combining the order ahead feature in the Starbucks app and Amazon Go’s Just Walk Out technology, thereby emphasizing an easy checkout experience for its customers. The new store offerings comprises of Starbucks menu and a curated assortment of food and beverages in the Amazon Go market, including fresh-prepared salads, sandwiches, bakery items and snack options.
In January 2022, the company initiated its mobile order and delivery service — Starbucks Delivers — on Meituan platforms. Focused on customers in China, the expanded features include beverage customizations, smart technology that automatically reallocates orders to other stores when products are sold out along with the delivery debut of Starbucks Reserve. The company stated that Starbucks Rewards members can enjoy the same benefits as using the Starbucks China app.
The company also unveiled its first energy drink Starbucks BAYATM. Made with caffeine, the item will join the Starbucks bottled and canned beverage portfolio. The company stated its availability in fruit flavors, including Mango Guava, Raspberry Lime and Pineapple Passionfruit.
Fiscal 2022 Guidance
For fiscal 2022, the company anticipates global comparable sales to reach high-single digits. The company expects to open approximately 2,000 net new stores globally in fiscal 2022, up from 1,173 store openings reported in fiscal 2021.
Consolidated revenues for fiscal 2022 are anticipated between $32.5 billion and $33 billion.
For fiscal 2022, the company anticipates non-GAAP EPS growth in the range of 8-10% from the base of $3.10 in fiscal 2021 (the figure is adjusted for non-GAAP treatment of certain integration costs and excludes the involvement of an extra week).
Zacks Rank & Key Picks
Starbucks currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the Zacks Retail-Wholesale sector include MarineMax, Inc. (HZO - Free Report) , Arcos Dorados Holdings Inc. (ARCO - Free Report) and Tapestry, Inc. (TPR - Free Report) .
MarineMax sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 55.8%, on average. Shares of the company have increased 12.3% in the past year.
The Zacks Consensus Estimate for MarineMax’s 2022 sales and EPS suggests growth of 11.8% and 16.2%, respectively, from the year-ago period’s levels.
Arcos Dorados flaunts a Zacks Rank #1. ARCO has a long-term earnings growth of 42.9%. Shares of the company have increased 35.5% in the past year.
The Zacks Consensus Estimate for Arcos Dorados’ 2022 sales and EPS suggests growth of 10.4% and 255.6%, respectively, from the year-ago period’s levels.
Tapestry carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 29%, on average. Shares of the company have increased 12% in the past year.
The Zacks Consensus Estimate for Tapestry’s 2022 sales and EPS suggests growth of 14.9% and 18.2%, respectively, from the year-ago period’s levels.