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Starbucks Corporation (SBUX - Free Report) reported fourth-quarter fiscal 2024 results, with earnings meeting the Zacks Consensus Estimate but revenues missing the same. Following the results, the company’s shares witnessed a marginal gain of 0.6% in the after-hours trading session yesterday.
Brian Niccol, chairman and CEO, emphasized the need for a fundamental shift in Starbucks' strategy to re-engage customers. He described the company's new approach, "Back to Starbucks," as a core strategy, which is focused on reviving its brand identity and consistently delivering a high-quality experience. Niccol expressed confidence that by returning to these basics, Starbucks will regain customer loyalty and momentum, noting that the company has a clear plan and is moving swiftly to restore growth.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Discussion on Earnings, Revenues & Comps of SBUX
In the fiscal fourth quarter, the company reported adjusted earnings per share (EPS) of 80 cents, in line with the Zacks Consensus Estimate. The bottom line decreased 24.5% year over year from adjusted EPS of $1.06 reported in the prior-year quarter.
Quarterly revenues of $9,074 million missed the Zacks Consensus Estimate of $9,097 million. However, the top line declined 3.2% on a year-over-year basis, due to dismal North America and U.S. comparable store sales.
Global comparable store sales declined 7% year over year. The downside was backed by a decrease of 8% in comparable transactions, partially overshadowed by a 2% increase in average tickets.
In the fiscal fourth quarter, Starbucks opened 722 net new stores worldwide, bringing the total store count to 40,199.
Starbucks Corporation Price, Consensus and EPS Surprise
On a non-GAAP basis, the operating margin was 14.4%, contracted 380 basis points (bps) from the prior-year. The decline was mainly due to deleveraging, investments in wages and benefits for store partners and heightened promotional activities. However, this contraction was partially mitigated by price increases and improved in-store operational efficiencies.
SBUX’s Segmental Details
Starbucks has three reportable operating segments—North America, International and Channel Development.
North America: In the fiscal fourth quarter, segmental net revenues were $6.69 billion, down 3% year over year. The segment’s comparable store sales declined 6% against 8% growth in the prior-year quarter. Average transactions declined 10%, whereas change in tickets rose 4% year over year.
Operating margin was 18.7% compared with 23.2% in the prior-year quarter. The negative impact stemmed from a combination of deleverage, additional investments in store partner compensation and benefits and heightened promotional efforts.
International: Segmental net revenues of $1.89 billion declined 4% year over year. The segment’s comparable store sales declined 9% year over year, owing to 4% and 5% decline in transactions and tickets, respectively.
Operating margin contracted 30 bps year over year to 14.9%. The downside was due to investments in store partner wages, benefits and promotional activities and strategic investments. However, this contraction was partially mitigated by improved in-store operational efficiencies.
In the fiscal fourth quarter, comps in China dropped 14% against growth of 5% in the prior-year quarter. A 6% decline in transactions and 8% decrease in tickets hurt the company’s performance in China.
Channel Development: Net revenues in the segment fell 4% year over year to $465.4 million. The dismal performance was due to a decline in revenues in the Global Coffee Alliance from SKU optimization.
In the quarter, the segment’s operating margin expanded 110 bps year over year to 56.9%. The increase was driven by a shift in sales mix and reduced product costs associated with the Global Coffee Alliance. This growth was somewhat offset by higher costs impacting income from its North America’s Coffee Partnership joint venture.
Financial Details of Starbucks
The company ended the fiscal fourth quarter with cash and cash equivalents of $3.3 billion compared with $3.6 billion as of Oct. 1, 2023. On Sept. 30, 2024, long-term debt totaled $14.3 billion compared with $13.5 billion as of Oct. 1, 2023.
Meanwhile, management declared a quarterly cash dividend of 61 cents per share. The dividend is payable on Nov. 29 to its shareholders of record as of Nov. 15, 2024.
Other Updates on SBUX
The Starbucks Rewards loyalty program’s 90-day active members in the United States increased to 33.8 million, up 4% year over year.
SBUX Suspends 2025 Guidance
In its Oct. 22, 2024 announcement, the company cited that the CEO transition and current business conditions as reasons for suspending guidance for fiscal 2025. This decision is intended to provide sufficient time to thoroughly assess the business, strengthen core strategies and focus on stabilizing the company to position it for long-term growth.
CAVA has a trailing four-quarter earnings surprise of 257.7%, on average. The stock has surged 336.8% in the past year. The Zacks Consensus Estimate for CAVA’s 2024 sales and EPS indicates a rise of 29.1% and 104.8%, respectively, from the year-ago period’s levels.
Boot Barn Holdings, Inc. (BOOT - Free Report) sports a Zacks Rank of 1. BOOT has a trailing four-quarter earnings surprise of 6.8%, on average. The stock has risen 86.2% in the past year.
The consensus estimate for BOOT’s fiscal 2025 sales and EPS indicates growth of 12.1% and 10.9%, respectively, from the year-ago period’s levels.
ANF has a trailing four-quarter earnings surprise of 28%, on average. The stock has surged 127.7% in the past year. The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and EPS indicates growth of 13% and 63.4%, respectively, from the year-ago period’s levels.
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Starbucks' Q4 Earnings Meet Estimate, Revenues Lag, Comps Decline
Starbucks Corporation (SBUX - Free Report) reported fourth-quarter fiscal 2024 results, with earnings meeting the Zacks Consensus Estimate but revenues missing the same. Following the results, the company’s shares witnessed a marginal gain of 0.6% in the after-hours trading session yesterday.
Brian Niccol, chairman and CEO, emphasized the need for a fundamental shift in Starbucks' strategy to re-engage customers. He described the company's new approach, "Back to Starbucks," as a core strategy, which is focused on reviving its brand identity and consistently delivering a high-quality experience. Niccol expressed confidence that by returning to these basics, Starbucks will regain customer loyalty and momentum, noting that the company has a clear plan and is moving swiftly to restore growth.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Discussion on Earnings, Revenues & Comps of SBUX
In the fiscal fourth quarter, the company reported adjusted earnings per share (EPS) of 80 cents, in line with the Zacks Consensus Estimate. The bottom line decreased 24.5% year over year from adjusted EPS of $1.06 reported in the prior-year quarter.
Quarterly revenues of $9,074 million missed the Zacks Consensus Estimate of $9,097 million. However, the top line declined 3.2% on a year-over-year basis, due to dismal North America and U.S. comparable store sales.
Global comparable store sales declined 7% year over year. The downside was backed by a decrease of 8% in comparable transactions, partially overshadowed by a 2% increase in average tickets.
In the fiscal fourth quarter, Starbucks opened 722 net new stores worldwide, bringing the total store count to 40,199.
Starbucks Corporation Price, Consensus and EPS Surprise
Starbucks Corporation price-consensus-eps-surprise-chart | Starbucks Corporation Quote
Overall Margin Contracts in SBUX’s Q4
On a non-GAAP basis, the operating margin was 14.4%, contracted 380 basis points (bps) from the prior-year. The decline was mainly due to deleveraging, investments in wages and benefits for store partners and heightened promotional activities. However, this contraction was partially mitigated by price increases and improved in-store operational efficiencies.
SBUX’s Segmental Details
Starbucks has three reportable operating segments—North America, International and Channel Development.
North America: In the fiscal fourth quarter, segmental net revenues were $6.69 billion, down 3% year over year. The segment’s comparable store sales declined 6% against 8% growth in the prior-year quarter. Average transactions declined 10%, whereas change in tickets rose 4% year over year.
Operating margin was 18.7% compared with 23.2% in the prior-year quarter. The negative impact stemmed from a combination of deleverage, additional investments in store partner compensation and benefits and heightened promotional efforts.
International: Segmental net revenues of $1.89 billion declined 4% year over year. The segment’s comparable store sales declined 9% year over year, owing to 4% and 5% decline in transactions and tickets, respectively.
Operating margin contracted 30 bps year over year to 14.9%. The downside was due to investments in store partner wages, benefits and promotional activities and strategic investments. However, this contraction was partially mitigated by improved in-store operational efficiencies.
In the fiscal fourth quarter, comps in China dropped 14% against growth of 5% in the prior-year quarter. A 6% decline in transactions and 8% decrease in tickets hurt the company’s performance in China.
Channel Development: Net revenues in the segment fell 4% year over year to $465.4 million. The dismal performance was due to a decline in revenues in the Global Coffee Alliance from SKU optimization.
In the quarter, the segment’s operating margin expanded 110 bps year over year to 56.9%. The increase was driven by a shift in sales mix and reduced product costs associated with the Global Coffee Alliance. This growth was somewhat offset by higher costs impacting income from its North America’s Coffee Partnership joint venture.
Financial Details of Starbucks
The company ended the fiscal fourth quarter with cash and cash equivalents of $3.3 billion compared with $3.6 billion as of Oct. 1, 2023. On Sept. 30, 2024, long-term debt totaled $14.3 billion compared with $13.5 billion as of Oct. 1, 2023.
Meanwhile, management declared a quarterly cash dividend of 61 cents per share. The dividend is payable on Nov. 29 to its shareholders of record as of Nov. 15, 2024.
Other Updates on SBUX
The Starbucks Rewards loyalty program’s 90-day active members in the United States increased to 33.8 million, up 4% year over year.
SBUX Suspends 2025 Guidance
In its Oct. 22, 2024 announcement, the company cited that the CEO transition and current business conditions as reasons for suspending guidance for fiscal 2025. This decision is intended to provide sufficient time to thoroughly assess the business, strengthen core strategies and focus on stabilizing the company to position it for long-term growth.
Zacks Rank & Key Picks
Starbucks currently has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Zacks Retail – Restaurants industry are:
CAVA Group, Inc. (CAVA - Free Report) sports a Zacks Rank of 1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CAVA has a trailing four-quarter earnings surprise of 257.7%, on average. The stock has surged 336.8% in the past year. The Zacks Consensus Estimate for CAVA’s 2024 sales and EPS indicates a rise of 29.1% and 104.8%, respectively, from the year-ago period’s levels.
Boot Barn Holdings, Inc. (BOOT - Free Report) sports a Zacks Rank of 1. BOOT has a trailing four-quarter earnings surprise of 6.8%, on average. The stock has risen 86.2% in the past year.
The consensus estimate for BOOT’s fiscal 2025 sales and EPS indicates growth of 12.1% and 10.9%, respectively, from the year-ago period’s levels.
Abercrombie & Fitch Co. (ANF - Free Report) presently carries a Zacks Rank #2 (Buy).
ANF has a trailing four-quarter earnings surprise of 28%, on average. The stock has surged 127.7% in the past year. The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and EPS indicates growth of 13% and 63.4%, respectively, from the year-ago period’s levels.