Starbucks Corporation (SBUX), one of the leading roaster and retailer of specialty coffee, registered robust results for the fourth quarter and fiscal 2010. Adjusted quarterly earnings of 37 cents a share were a penny below the Zacks Consensus Estimate of 38 cents, but increased 54.2% from 24 cents delivered in the prior-year quarter. On a reported basis, earnings grew a robust 85% to 37 cents a share compared with 20 cents delivered in year-earlier period.
For fiscal 2010, earnings were $1.28 per share, which were below the Zacks Consensus Estimate of $1.43, but again was up 60% compared to the prior year.
The coffee retailer forecasts fiscal 2011 adjusted earnings range of $1.41 to $1.47 per share, indicating a 15%−20% annual growth. The current Zacks Consensus Estimate of $1.64 is well ahead of the guidance range.
Total sales jumped 17.2% to $2.8 billion in the quarter compared with $2.4 billion in the prior-year quarter, portraying same-store sales growth of 8%. Same-store sales benefited from traffic and average ticket growth of 5% and 2%, respectively. Revenues were below the Zacks Consensus Estimate of $2.9 billion.
For the year 2010, revenues grew 9.5% to $10.7 billion, attributable to 7% growth in same-store sales, which were further driven by 3% increase in traffic and 4% average ticket growth. Annual revenues were also below the Zacks Consensus Estimate of $11.8 billion.
For fiscal 2011, the company expects to post revenue growth in the mid to high single-digit range, driven by a low to mid single-digit growth in comparable same store sales.
Adjusted operating margin for the quarter expanded 590 basis points (bps) to 14.1% compared with the prior-year quarter, reflecting sales leverage and operational competence, partially offset by higher marketing expenses related to launch of Starbucks VIA and the new customizable Frappuccino blended beverages.
Annual adjusted operating margin expanded 760 bps to 13.3% versus the prior-year.
Starbucks expects adjusted operating margin to increase by 50 to 100 bps year-over-year in fiscal 2011.
Segment Details
U.S. segment: Net revenue in the segment rose 15.3% to $1,973.6 million compared with third-quarter 2009, attributed to a 8% growth in same-store sales. Same-store sales were driven by a 6% rise in traffic and a 2% jump in average tickets.
International segment: Net revenue jumped 21% year over year to $619.3 million in the quarter, reflecting a 7% growth in same-store sales. The increase consisted of a 4% rise in traffic and a 3% hike in tickets.
Global Consumer Products Group (“CPG”) segment: Net revenue rose 19% to $201.3 million in the quarter compared with $169.1 million in the prior-year period, primarily due to the introduction of Starbucks VIA Ready Brew, increased sales of packaged coffee, and sales of Seattle’s Best Coffee in the restaurants.
Store Expansion Plan
Starbucks plans to initiate about 500 net new stores globally in fiscal 2011; approximately 100 in the U.S. and approximately 400 internationally, the majority of which are expected to be licensed stores.
The company assumes capital spending to be approximately $450 million in fiscal 2010 and $500 million−$600 million in fiscal 2011.
During the fourth quarter, the company repurchased 4.5 million shares worth $112 million and for the full year Starbucks repurchased 11.2 million shares worth $285 million.
