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Category: Stock Market and Starbucks
Date: 27 April 2020 Stock Price: $75.58 We take a look at the 1st quarter 2020 earnings report of Starbucks, one of the world's best known coffee shop franchises. We are very late in covering Starbucks' 1st quarter 2020 earnings and this earnings report is unaffected by Covid-19.
The worry for the group is that with Covid-19 affecting countries across the world, and countries going into lockdown, how will this affect the group's next quarter's earnings? |
About Starbucks
For those that don't know anything about Starbucks below a bit more detail regarding the group as obtained from their website
The Starbucks Story
Our story began in 1971. Back then we were a roaster and retailer of whole bean and ground coffee, tea and spices with a single store in Seattle’s Pike Place Market. Today, we are privileged to connect with millions of customers every day with exceptional products and more than 30,000 retail stores in 80 markets.
Folklore
Starbucks is named after the first mate in Herman Melville’s Moby Dick. Our logo is also inspired by the sea – featuring a twin-tailed siren from Greek mythology
.
Starbucks Mission
Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.
Our Coffee
We’ve always believed in serving the best coffee possible. It's our goal for all of our coffee to be grown under the highest standards of quality, using ethical sourcing practices. Our coffee buyers personally travel to coffee farms in Latin America, Africa and Asia to select high quality beans. And our master roasters bring out the balance and rich flavor of the beans through the signature Starbucks Roast.
Our Stores
Our stores are a neighborhood gathering place for meeting friends and family. Our customers enjoy quality service, an inviting atmosphere and an exceptional beverage. Total stores: 30,000 across 80 markets (as of June 30, 2019)
Our Partners
We offer some of the finest coffees in the world, grown, prepared and served by the finest people. Our employees, who we call partners, are at the heart of the Starbucks Experience. We believe in treating our partners with respect and dignity. We are proud to offer several landmark programs for our partners, including comprehensive health coverage for eligible full- and part-time partners, access to full college tuition coverage through the Starbucks College Achievement Plan, and equity in the company through Bean Stock.
Our Products
Starbucks offers a range of exceptional products that customers enjoy in our stores, at home, and on the go.
Coffee: More than 30 blends and single-origin premium coffees.
Handcrafted Beverages: Fresh-brewed coffee, hot and iced espresso beverages, Iced Coffee, Cold Brew, Nitro, Frappuccino® coffee and non-coffee blended beverages, Starbucks Refreshers® beverages, and Teavana® teas.
Merchandise: Coffee- and tea-brewing equipment, mugs and accessories, packaged goods, books and gifts.
Fresh Food: Baked pastries, cold and hot sandwiches, salads, salad and grain bowls, oatmeal, yogurt parfaits and fruit cups.
Consumer products available where groceries are sold
The Starbucks Story
Our story began in 1971. Back then we were a roaster and retailer of whole bean and ground coffee, tea and spices with a single store in Seattle’s Pike Place Market. Today, we are privileged to connect with millions of customers every day with exceptional products and more than 30,000 retail stores in 80 markets.
Folklore
Starbucks is named after the first mate in Herman Melville’s Moby Dick. Our logo is also inspired by the sea – featuring a twin-tailed siren from Greek mythology
.
Starbucks Mission
Our mission: to inspire and nurture the human spirit – one person, one cup and one neighborhood at a time.
Our Coffee
We’ve always believed in serving the best coffee possible. It's our goal for all of our coffee to be grown under the highest standards of quality, using ethical sourcing practices. Our coffee buyers personally travel to coffee farms in Latin America, Africa and Asia to select high quality beans. And our master roasters bring out the balance and rich flavor of the beans through the signature Starbucks Roast.
Our Stores
Our stores are a neighborhood gathering place for meeting friends and family. Our customers enjoy quality service, an inviting atmosphere and an exceptional beverage. Total stores: 30,000 across 80 markets (as of June 30, 2019)
Our Partners
We offer some of the finest coffees in the world, grown, prepared and served by the finest people. Our employees, who we call partners, are at the heart of the Starbucks Experience. We believe in treating our partners with respect and dignity. We are proud to offer several landmark programs for our partners, including comprehensive health coverage for eligible full- and part-time partners, access to full college tuition coverage through the Starbucks College Achievement Plan, and equity in the company through Bean Stock.
Our Products
Starbucks offers a range of exceptional products that customers enjoy in our stores, at home, and on the go.
Coffee: More than 30 blends and single-origin premium coffees.
Handcrafted Beverages: Fresh-brewed coffee, hot and iced espresso beverages, Iced Coffee, Cold Brew, Nitro, Frappuccino® coffee and non-coffee blended beverages, Starbucks Refreshers® beverages, and Teavana® teas.
Merchandise: Coffee- and tea-brewing equipment, mugs and accessories, packaged goods, books and gifts.
Fresh Food: Baked pastries, cold and hot sandwiches, salads, salad and grain bowls, oatmeal, yogurt parfaits and fruit cups.
Consumer products available where groceries are sold
- Coffee and Tea: Whole bean and ground coffee (Starbucks and Seattle’s Best Coffee brands), Starbucks VIA® Instant, Starbucks espresso capsules available on the Nespresso and Nescafé Dolce Gusto systems, Starbucks® Coffee K-Cup® pods, Starbucks® and Teavana® Verismo® pods.
- Ready-to-Drink (RTD): Starbucks® bottled Frappuccino® coffee drinks, Starbucks Iced Latte, Single Serve Cold Brew, Doubleshot® Coffee Smoothies, Teavana Craft Iced Teas, Teavana Sparkling Craft Iced Teas, Starbucks Discoveries® chilled cup coffees, Starbucks Discoveries Iced Café Favorites®, Starbucks Iced Coffee, Starbucks Doubleshot® espresso drinks, Starbucks Doubleshot® Energy Coffee drinks; Starbucks Refreshers® beverages, Evolution Fresh™ bottled juices.
Brand Portfolio
Starbucks Coffee, Seattle’s Best Coffee, Teavana, Evolution Fresh, Ethos Water and Torrefazione Italia Coffee.
Investor Information
Starbucks Coffee, Seattle’s Best Coffee, Teavana, Evolution Fresh, Ethos Water and Torrefazione Italia Coffee.
Investor Information
- Starbucks went public on June 26, 1992 at a price of $17 per share (or $0.53 per share, adjusted for subsequent stock splits) and closed trading that first day at $21.50 per share.
- Starbucks was incorporated under the laws of the State of Washington, in Olympia, Washington, on Nov. 4, 1985.
- Starbucks Corporation's common stock is listed on NASDAQ, under the trading symbol SBUX.
Overview of Starbucks 1st quarter 2020 earnings report
The numbers below refers to the latest quarter unless specified otherwise:
- Net revenues: $7.097 billion (up from $6.632 for the same quarter of the previous year)
- Net revenues increased by 7% over the last 12 months
- Total operating expenses: $5.951 billion (up from $5.684 billion for the same quarter of the previous year)
- Total operating expenses increased by 4.7% over the last 12 months
- Net earnings: $885.7 million (up from $760.6 million for the same quarter of the previous year)
- Net earnings increased by 16.4% over the last 12 months
- Diluted earnings per share: $0.74 (up 21.3% from $0.61 for the same quarter of the previous year)
- PE ratio of Starbucks: 26.4
- Dividend per share for the quarter: $0.41 (up from $0.36 for the same quarter of the previous year)
- Dividend yield of Starbucks: 2.1%
- Diluted number of shares in issue: 1.191 billion
- Cash and cash equivalents: $3.040 billion
- Cash and cash equivalents per share: $2.54
- Cash and cash equivalents makes up 3.3% of Starbucks' market capital
- Cash and cash equivalents makes up 10.96% of Starbucks' total assets
- Inventories: $1.408 billion
- Inventories makes up 5.1% of Starbucks' total assets
- Cash generated from operations: $1.836 billion
- Cash generated from operations per share: $1.53
Starbucks' management commentary on their 1st quarter 2020 earnings report
SEATTLE; January 28, 2020 – Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its 13- week fiscal first quarter ended December 29, 2019
“Building on solid business momentum from fiscal 2019, Starbucks performed very well throughout the first quarter, including one of the strongest holiday seasons in the history of our company. As a result, we are off to a strong start in fiscal 2020,” said Kevin Johnson, president and ceo. “Our growth was fueled by a healthy balance of comparable sales growth and new store development, as well as continued expansion of our Global Coffee Alliance with Nestlé. Investments in our partners, beverage innovation and digital customer relationships contributed not only to strong topline growth, but also significant margin expansion in the quarter.”
“Building on solid business momentum from fiscal 2019, Starbucks performed very well throughout the first quarter, including one of the strongest holiday seasons in the history of our company. As a result, we are off to a strong start in fiscal 2020,” said Kevin Johnson, president and ceo. “Our growth was fueled by a healthy balance of comparable sales growth and new store development, as well as continued expansion of our Global Coffee Alliance with Nestlé. Investments in our partners, beverage innovation and digital customer relationships contributed not only to strong topline growth, but also significant margin expansion in the quarter.”
“Our partners are the center of creating a special Starbucks Experience for each and every customer we serve, and I am very grateful for their extraordinary efforts through this holiday quarter. As we begin our fiscal second quarter, I want to acknowledge the dynamic situation our partners in China are navigating as health officials respond to the coronavirus. As events unfold, we will be transparent with all stakeholders in communicating how we are responding to these extraordinary circumstances and the implications for our near-term business results. We remain optimistic and committed to the long-term opportunity in China, building on our brand heritage and 20-year legacy of profitable growth,” concluded Johnson
Fiscal 2020 Guidance
The company's fiscal year 2020 guidance is unchanged from what was provided in conjunction with its Q4 fiscal 2019 earnings report, which excludes any impact of the coronavirus. Currently, we have closed more than half of our stores in China and continue to monitor and modify the operating hours of all of our stores in the market in response to the outbreak of the coronavirus. This is expected to be temporary. Given the dynamic nature of these circumstances, the duration of business disruption, reduced customer traffic and related financial impact cannot be reasonably estimated at this time but are expected to materially affect our International segment and consolidated results for the second quarter and full year of fiscal 2020. The company will update its guidance for fiscal 2020 when we can reasonably estimate the impact of the coronavirus.
Fiscal 2020 Guidance
The company's fiscal year 2020 guidance is unchanged from what was provided in conjunction with its Q4 fiscal 2019 earnings report, which excludes any impact of the coronavirus. Currently, we have closed more than half of our stores in China and continue to monitor and modify the operating hours of all of our stores in the market in response to the outbreak of the coronavirus. This is expected to be temporary. Given the dynamic nature of these circumstances, the duration of business disruption, reduced customer traffic and related financial impact cannot be reasonably estimated at this time but are expected to materially affect our International segment and consolidated results for the second quarter and full year of fiscal 2020. The company will update its guidance for fiscal 2020 when we can reasonably estimate the impact of the coronavirus.
Starbucks (NASDAQ: SBUX) stock price history
The image below shows the stock price history of Starbucks (SBUX) over the last 5 years. And its been a very good time for Starbucks (SBUX) stockholders over the last 5 years. 5 years ago the stock of Starbucks was trading at $50.30 and its currently trading at $75.58. That's a return of 50.2% provided to Starbucks stockholders over the last 5 years.
The stock of Starbucks is trading at close to the midpoint of its 52 week high and 52 week low which to us is a clear indication that the short term sentiment and momentum of Starbucks stock is neutral.
The stock of Starbucks is trading at close to the midpoint of its 52 week high and 52 week low which to us is a clear indication that the short term sentiment and momentum of Starbucks stock is neutral.
Recent searches for Starbucks
According to Google Trends (see graphic below) there was a significant spike in the number of searches for Starbucks stock price and SBUX stock price (in the USA) in the middle of of March 2020, this coincides with the massive drop in the group's stock price due to massive global market sell offs due to the Coronavirus and the impact its having on global economic growth.
And the searches for starbucks stock price was pretty wide spread across most of the United States as the map of the two search terms below shows
Recent coverage of Starbucks
The extract below covers the latest regarding Starbucks as obtained from TheStreet.com (9 April 2020)
Starbucks (SBUX) said its fiscal second-quarter earnings will be cut nearly in half as sales plunged in the U.S. and China, the coffee-chain's two biggest markets, because of the coronavirus pandemic. The company estimated that adjusted earnings in the period would be 32 cents a share, down from 60 cents a year earlier.
Analysts' most recent estimates called for second-quarter earnings of 39 cents a share. "These estimates reflect the impact of lost sales for the period as well as incremental expenses for partner wages and benefits, store operations and other activities related to the Covid-19 outbreak," Starbucks said. "This includes inventory write-offs, honoring supplier obligations, store safety-related items, asset impairments and preliminary estimates of certain government stimulus program benefits."
Starbucks also pulled its fiscal-year guidance.
“Given the dynamic nature of the Covid-19 crisis and how it is affecting our business globally, we are currently unable to estimate the full financial impacts beyond Q2 with reasonable accuracy,” said a letter to shareholders signed by CEO Kevin Johnson and Chief Financial Officer Patrick Grismer. The company said U.S. same-store sales fell 3% during its second quarter, with the bulk of the declines coming after March 12, when many Americans were given stay-at-home orders because of the virus outbreak and Starbucks was forced to close stores. Starbucks said same-store sales declines settled between 60% and 70% during the final week of March.
Read the full article here
Starbucks (SBUX) said its fiscal second-quarter earnings will be cut nearly in half as sales plunged in the U.S. and China, the coffee-chain's two biggest markets, because of the coronavirus pandemic. The company estimated that adjusted earnings in the period would be 32 cents a share, down from 60 cents a year earlier.
Analysts' most recent estimates called for second-quarter earnings of 39 cents a share. "These estimates reflect the impact of lost sales for the period as well as incremental expenses for partner wages and benefits, store operations and other activities related to the Covid-19 outbreak," Starbucks said. "This includes inventory write-offs, honoring supplier obligations, store safety-related items, asset impairments and preliminary estimates of certain government stimulus program benefits."
Starbucks also pulled its fiscal-year guidance.
“Given the dynamic nature of the Covid-19 crisis and how it is affecting our business globally, we are currently unable to estimate the full financial impacts beyond Q2 with reasonable accuracy,” said a letter to shareholders signed by CEO Kevin Johnson and Chief Financial Officer Patrick Grismer. The company said U.S. same-store sales fell 3% during its second quarter, with the bulk of the declines coming after March 12, when many Americans were given stay-at-home orders because of the virus outbreak and Starbucks was forced to close stores. Starbucks said same-store sales declines settled between 60% and 70% during the final week of March.
Read the full article here
Starbucks latest stock valuation
So based on Starbucks (SBUX) latest earnings report and their fiscal guidance what do we value the stock of Starbucks at? Based on their earnings report and their withdrawal of their fiscal guidance and predicted impact of Coronavirus on their earnings our valuation model provides a target price (full value price) for Starbucks (SBUX) at $64.30 a stock (down significantly from our 4th quarter 2019 earnings report valuation). We therefore believe the stock of Starbucks is overvalued
We recommend that long term fundamental and value investors look to enter a stock at least 10% below our target (full value) price which in this case is $64.30. A good entry point into Starbucks would therefore be at $57.90 or below.
We expect the stock of Starbucks to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
We recommend that long term fundamental and value investors look to enter a stock at least 10% below our target (full value) price which in this case is $64.30. A good entry point into Starbucks would therefore be at $57.90 or below.
We expect the stock of Starbucks to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months.
Next earning release of Starbucks
It is expected that Starbucks will release their 2nd quarter 2020 earnings report towards the end of April 2020