Starbucks Reports Record Q3 FY17 Financial and Operating Results

Company Announces Strategic Actions to Advance Growth Agenda and Increase Returns

Q3 Comp Store Sales Up 5% in the U.S. and Americas, 7% in China and 4% Globally

Consolidated Net Revenues Up 8% to Q3 Record $5.7 Billion; GAAP Earnings Per Share Total $0.47; Non-GAAP Earnings Per Share Expand to $0.55

Company to Assume Full Ownership of East China JV and Operate all Stores in Mainland China

SEATTLE; July 27, 2017 – Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its 13-week fiscal third quarter and 39-week fiscal year to date ended July 2, 2017. Fiscal 2017 and fiscal 2016 GAAP results include items which are excluded from non-GAAP results. Please refer to the reconciliation of GAAP measures to non-GAAP measures at the end of this release for more information.

Q3 Fiscal 2017 Highlights:

  • Global comparable store sales increased 4%
    • Americas comp store sales increased 5%
      • U.S. comp store sales increased 5%, driven by a 5% increase in average ticket
      • U.S. average ticket increased 4% - transactions grew 1% after adjusting for the estimated impact of order consolidation following the shift in the Starbucks RewardsTM loyalty program from a frequency-based to spend-based model in Q3 FY16
    • CAP comp store sales increased 1%
      • China comp store sales increased 7%, driven by a 5% increase in transactions
  • Consolidated net revenues grew 8% to a Q3 record $5.7 billion; up 9% after excluding $53.7 million of unfavorable foreign currency translation
  • GAAP operating income increased 2% to $1.0 billion, inclusive of impairments
    • Non-GAAP operating income up 13% over non-GAAP operating income in Q3 FY16, to $1.2 billion
  • GAAP operating margin of 18.4% declined 110 basis points versus Q3 FY16, inclusive of impairments
    • Non-GAAP operating margin expands 100 bps over Q3 FY16, to 20.8%
  • GAAP EPS of $0.47 per share, down 8% versus Q3 FY16, inclusive of impairments
    • Non-GAAP EPS up 12% over Q3 FY16, to $0.55 per share
  • The company opened 575 net new stores globally, bringing total store count to 26,736 across 75 countries
  • Starbucks Rewards membership up 8% year-over-year, to 13.3 million active members
  • Starbucks Rewards represented 36% of U.S. company-operated sales
  • Mobile Payment increased to 30% of transactions in U.S. company-operated stores
  • Mobile Order and Pay increased to 9% of transactions in U.S. company-operated stores
  • The company repurchased 3.5 million shares of common stock in Q3 FY17; approximately 95 million shares remain available for purchase under current authorizations
  • The Board of Directors declared a cash dividend of $0.25 per share, payable on August 25, 2017, to shareholders of record as August 10, 2017

PDF: Detailed Financial Data

“Starbucks leveraged food and beverage innovation, an elevated in-store experience and personalized digital connections to our customers to deliver another quarter of record financial and operating performance, despite the softness impacting our principal sectors overall,” said Kevin Johnson, Starbucks president and ceo. “Continued focus on execution against our strategic priorities enabled us to gain share and positions us well for the future.”

"Starbucks once again reported record operating and financial performance in Q3 - reflecting the back-half acceleration we've been anticipating," said Scott Maw, Starbucks cfo. "Nonetheless, despite posting record performance in Q3 and further extending our lead compared to the industry overall, the combination of trends in the quarter and ongoing macro pressures impacting the retail and restaurant sectors has us a bit more cautious going into Q4."

Company Announces Strategic Actions to Advance Growth Agenda and Increase Returns

Starbucks also announced several strategic actions to optimize its store portfolio, strengthen its core, accelerate execution against its long-term growth strategy and further increase returns on capital.

Company to Assume Full Ownership of the Mainland China Market

Starbucks earlier today announced plans to consolidate its business operations across Mainland China by acquiring the 50% of Shanghai Starbucks Coffee Corporation that it didn’t already own from JV partners Uni-President Enterprises Corporation ("UPEC") and President Chain Store Corporation ("PCSC"). Customers in China have embraced the Starbucks brand and customer experience since the company opened its first store in the market 18 years ago. Starbucks stores in China are among the most innovative, coffee-forward Starbucks stores in the world, consistently generating strong revenue and same-store sales growth, record AUV’s and world-leading returns on investment. Mainland China is Starbucks largest and fastest growing international market with 2,800 stores in 130 cities, employing nearly 40,000 partners. Through this acquisition, the largest single acquisition in the company's history, Starbucks will assume 100% ownership of approximately 1,300 Starbucks stores in 25 cities in the Shanghai, Jiangsu and Zhejiang Provinces.

Also as announced earlier today, concurrently with the purchase of the East China JV, UPEC and PCSC will acquire Starbucks 50% interest in President Starbucks Coffee Taiwan Limited, and assume 100% ownership of Starbucks operations in Taiwan. Founded in 1997, the Taiwan JV currently operates approximately 410 Starbucks stores in Taiwan.

Company to Close all 379 Teavana Retail Stores

As reported on the Q2 call, many of the company’s principally mall-based Teavana retail stores have been persistently underperforming. Following a strategic review of the Teavana store business, the company concluded that despite efforts to reverse the trend through creative merchandising and new store designs, the underperformance was likely to continue. As a result, Starbucks will close all 379 Teavana stores over the coming year, with the majority closing by Spring 2018. The approximately 3,300 partners impacted by these closures will receive opportunities to apply for positions at Starbucks stores, as Starbucks remains on track to create 240,000 new jobs globally and 68,000 in the U.S. over the next five years.

Infographics: Starbucks Q3 FY17 Financial and Operating Results; Realizing our Growth Ambitions in China; Starbucks Growth and Commitment to Tea