Food helping, says Starbucks Corporation boss

Starbucks2Food and digital innovation are helping attract customers into stores, said Starbucks Corporation CEO/president Kevin Johnson.

He was commenting on the coffee giant’s growth during its fourth quarter and fiscal year ending October 1.

For the quarter, net revenues for the China/Asia Pacific segment grew 2 per cent to US$859.9 million. Excluding $56.9 million for an extra week last year’s fourth quarter, net revenues grew 10 per cent, primarily driven by incremental revenues from 1036 store openings over the past 12 months and a 2 per cent growth in comparable store sales. The increase was partially offset by unfavourable foreign currency translation.

China comparative-store sales increased 8 per cent, driven by a 7 per cent increase in transactions. Overall four-quarter operating income grew 5 per cent to $201.7 million, while the operating margin expanded 60 points to 23.5 per cent, primarily driven by higher income from joint ventures, and partially offset by the lapping of the 53rd week in fourth quarter.

Consolidated net revenues were steady for the quarter at $5.7 billion, excluding $412.4 million for the extra week. Consolidated net revenues grew 8 per cent. GAAP operating income of $1 billion declined 16.7 per cent while non-GAAP operating income grew 2.8 per cent to $1.1 billion. GAAP operating margin of 17.9 per cent declined 360 points while the non-GAAP decline was 20 per cent, down 90 points.

The increased operating loss was primarily because of restructuring and impairment costs related to the company’s strategy to close Teavana tea retail stores and focus on the brand within Starbucks stores. Global comparable store sales increased 2 per cent, driven by a 2 per cent increase in average ticket and a 1 per cent increase in transactions; but up 3 per cent excluding the impact from Hurricanes Harvey and Irma. The impact from the hurricanes affected consolidated and US comparative store growth by 1 per cent as more than 1000 stores were temporarily closed.

Revenue growth

For the year, global comparable-store sales increased 3 per cent while consolidated net revenues grew 5 per cent to $22.4 billion. Excluding $412.4 million for the extra week in the fourth quarter last year, consolidated net revenues grew 7 per cent year-on-year.

GAAP operating income of $4.1 billion declined 0.9 per cent compared while non-GAAP operating income grew 7.8 per cent to $4.4 billion.
GAAP operating margin of 18.5 per cent declined 110 points, but was up 10 points to 19.7 per cent non-GAAP.

Starbucks opened 603 stores globally, taking its total to 27,339 across 75 countries. Johnson said system improvements are enabling the company to drive increased throughput, particularly in its busiest stores at peak times.

In September, the company announced it had entered into an agreement with long-time strategic partner Maxim’s Caterers in Asia to fully licence Starbucks business in Singapore, including transitioning the more than 130 company-run Starbucks stores. The partnership started in Hong Kong in 2000, and together they run more than 210 outlets across Cambodia, Hong Kong, Macau and Vietnam.

This story was first published on Inside Retail Asia.

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