Review of Starbucks Financial Performance in 2017 & 2018
Starbucks is the largest premium coffee brand of the world with 29,324 stores operational worldwide as of September 30, 2018. The net revenue of Starbucks Coffee has grown steadily over the past five years.
The premium coffee brand has maintained consistent focus upon product quality and customer service. This is the main reason its revenue and profits have grown. Moreover, it made some changes to its business model in the recent years to grow its focus upon the core and most profitable segments.
Starbucks Financial Performance 2018 versus 2017.
|Net Revenues||$24719.5 Million||$22386.8 Millions|
|Consolidated Operating Income||3.9 Millions||4.1 Millions|
|Cashflow from Operations||$11.9 Billion||$4.3 Billion|
|Capital Expenditures||$2 Billion||$1.5 Billion|
|Advertising expenses||$260.3 Million||$282.6 Million|
|Operating Expenses||$21.14 Billion||$18.64 Billion|
|G&A Expenses||$1.76 Billion||$1.45 Billion|
|Net earnings||$4.52 Billion||$2.9 Billion|
|Net Revenues from company operated stores||$19.7 Billion||$17.65 Billion|
|Net Revenues from Licensed stores||$2.65 Billion||$2.35 Billion|
|Revenue from United States||$17.4 Billion||$16.5 Billion|
|Revenue from International Market||$7.3 Billion||$5.86 Billion|
|Revenue from Americas||$16.73 Billion||$15.62 Billion|
|Revenue from China/Asia Pacific||$4.47 Billion||$3.24 Billion|
|Revenue from EMEA||$1048 Million||$958.7 Million|
- Net Revenues of Starbucks grew to $24,719.5 million in 2018 from $22,386.8 million in 2017, a growth of $2.3 billion or 10%.
- Starbucks comparable store sales grew globally by 2% in 2018 compared to the previous year, driven by a 3% growth in average ticket size.
- Consolidated operating income came down to $3.9 billion in 2018 (15.7% of net revenues of the fiscal year) from $4.1 billion in 2017 (18.5% of net revenues of the fiscal year).
- Operating Margin was 15.7% in 2018 compared to 18.5% in 2017. Reduction in operating margin in 2018 was caused mainly by the changes in food and beverages mix in the American markets as well as ownership change in East China at the end of the first quarter of fiscal 2018 as well as higher restructuring, impairment and other costs.
- Restructuring and impairment charges grew to $224 million in 2018 compared to $154 million in 2017.
- EPS (Earnings Per Share) grew to $3.24 in 2018 from $1.97 in 2017. The EPS increase was driven by several factors including gains form the acquisition of East China joint venture, sales of the Tazo brand as well as the net favorable impact from the Tax Cuts and Jobs Act (the “Tax Act”).
- Cash Flow from operations grew to $11.9 billion in 2018 compared to $4.3 billion in fiscal 2017. Cash flow from operations grew mainly due to the receipt of upfront Payment from Nestle related to global coffee allliance.
- Capital expenditures grew to $2 billion in 2018 compared to $1.5 billion in 2017.
- In 2018, Starbucks returned $8.9 billion to its shareholders compared to $3.5 billion in 2017 through share repurchases and dividends. (During the fourth quarter of 2018, the company started licensing the rights for marketing and sales of Starbucks branded products to Nestle through authorized channels.)
- Advertising expenses came down to $260.3 million in 2018 compared to $282.6 million in 2017.
- Total Operating expenses grew to $21.14 billion in 2018 compared to $18.64 billion in 2017. Starbucks total operating expenses were 85.5% of the Net Revenue in 2018 compared to 83.3% in 2017.
- General and administrative expenses grew to $1.76 billion in 2018 (7.1% of net revenues) compared to $1.45 billion in 2017 (6.5% of net revenues).
- Net Earnings attributable to Starbucks were $4.52 billion in 2018 (18.3% of net revenues for the fiscal year) compared to $2.9 billion in 2017 (12.9% of net revenues of the fiscal year).
- Net Revenues of the company from the company operated stores grew by 11.6% from 2017 to 2018. 2018 net revenue from company operated stores was $19.7 billion compared to $17.65 billion in 2017.
- Net Revenue of the company from licensed stores grew by 12.6% from 2017 to 2018. Starbucks net revenues from licensed stores reached $2.65 billion in 2018 compared to $2.35 billion in 2017.
- Net revenue of Starbucks from United States grew to $17.4 billion in 2018 compared to $16.5 billion in 2017.
- Net revenue of Starbucks from the other countries grew to $7.3 billion in 2018 from $5.86 billion in 2017.
- Total net revenue of Starbucks from the Americas grew to $16.73 billion in 2018 compared to $15.62 billion in 2017.
- Total Net Revenue of Starbucks from the China/Asia Pacific market grew to $4.47 billion in 2018 compared to $3.24 billion in 2017.
- Total Net Revenue of Starbucks from EMEA (Europe, Middle East & Africa) grew to $1,048 million in 2018 compared to $958.7 million in 2017.
- Source: Starbucks Annual Report 2018.
Starbucks is the largest coffee retail chain in the world. In 2019, the number of Starbucks stores (Sep 2019) was 31,256. Of the total stores, 15,834 were company-operated and 15,422 licensed stores. The company operated stores are the leading source of revenue for the company. Starbucks relies mainly on the Americas segment of its business for the largest part of its revenue. The US and Canada are the main markets of Starbucks in the Americas. Starbucks had a total of 9,974 company-operated stores operational in the Americas as of 2019 and 8,093 licensed stores. Internationally, Starbucks had 5,860 company-operated stores operational as of 2019 and 7,329 licensed stores. The company’s net revenue in 2019 reached $26,508.6 billion compared to $24,719.5 billion in 2018.