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Category: Stock Market and Starbucks (SBUX)
Date: 10 November 2020 Stock Price of Starbucks: $95.88 We take a look at the 4th quarter 2020 earnings report of Starbucks, one of the world's best known coffee shop franchises. For the quarter the group's net revenues declined by -8.1% to $6.3 billion and they reported net income of $392.6 million.
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I am very pleased with our strong finish to fiscal 2020, underpinned by a faster-than-expected recovery in our two lead growth markets, the U.S. and China. These results demonstrate the continued strength and relevance of our brand, the effectiveness of the actions we’ve taken to adapt to meaningful changes in consumer behavior and the extraordinary efforts of our green apron partners to serve our customers and communities in challenging circumstances- Kevin Johnson, president and ceo."
About Starbucks (SBUX)
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 4th quarter 2020 earnings report
The numbers below refers to the latest quarter unless specified otherwise:
- Net revenues: $6.203 billion (down from $6.747 for the same quarter of the previous year)
- Net revenues decreased by -8.1% over the last 12 months
- Total operating expenses: $5.757 billion (basically unchanged from $5.755 billion for the same quarter of the previous year)
- Total operating expenses increased by 0.003% over the last 12 months
- Net earnings: $392.6 million (down from $802.9 million for the same quarter of the previous year)
- Net earnings decreased by -51.1% over the last 12 months
- Diluted earnings per share: $0.33 (down from $0.67 for the same quarter of the previous year)
- PE ratio of Starbucks: 36.8
- Dividend per share for the quarter: $0.45 (up from $0.36 for the same quarter of the previous year)
- Dividend yield of Starbucks: 0.94%
- Diluted number of shares in issue: 1.179 billion
- Cash and cash equivalents: $4.350 billion
- Cash and cash equivalents per share: $3.68
- Cash and cash equivalents makes up 3.8% of Starbucks' market capital
- Cash and cash equivalents makes up 14.8% of Starbucks' total assets
- Inventories: $1.551 billion
- Inventories makes up 5.2% of Starbucks' total assets
- Cash generated from operations for the full fiscal year: $1.597 billion
- Cash generated from operations per share for the full fiscal year: $1.35
Starbucks' management commentary on their 4th quarter 2020 earnings report
SEATTLE--(BUSINESS WIRE)-- Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its 13-week fiscal fourth quarter ended September 27, 2020. GAAP results in fiscal 2020 and fiscal 2019 include items that 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.
“I am very pleased with our strong finish to fiscal 2020, underpinned by a faster-than-expected recovery in our two lead growth markets, the U.S. and China. These results demonstrate the continued strength and relevance of our brand, the effectiveness of the actions we’ve taken to adapt to meaningful changes in consumer behavior and the extraordinary efforts of our green apron partners to serve our customers and communities in challenging circumstances,” said Kevin Johnson, president and ceo.
“The guiding principles we established at the onset of the pandemic, combined with our industry-leading digital platform and our ability to innovate rapidly, continue to fuel our recovery and provide confidence in a robust operating outlook for fiscal 2021. Our strategies are working and I am optimistic that we will emerge from the COVID-19 pandemic as a stronger and more resilient company,” concluded Johnson.
Q4 Fiscal 2020 Highlights
“I am very pleased with our strong finish to fiscal 2020, underpinned by a faster-than-expected recovery in our two lead growth markets, the U.S. and China. These results demonstrate the continued strength and relevance of our brand, the effectiveness of the actions we’ve taken to adapt to meaningful changes in consumer behavior and the extraordinary efforts of our green apron partners to serve our customers and communities in challenging circumstances,” said Kevin Johnson, president and ceo.
“The guiding principles we established at the onset of the pandemic, combined with our industry-leading digital platform and our ability to innovate rapidly, continue to fuel our recovery and provide confidence in a robust operating outlook for fiscal 2021. Our strategies are working and I am optimistic that we will emerge from the COVID-19 pandemic as a stronger and more resilient company,” concluded Johnson.
Q4 Fiscal 2020 Highlights
- Global comparable store sales declined 9%, driven by a 23% decrease in comparable transactions, partially offset by a 17% increase in average ticket
- Americas and U.S. comparable store sales declined 9%, driven by a 25% decrease in comparable transactions, partially offset by a 21% increase in average ticket
- International comparable store sales were down 10%, driven by a 15% decline in comparable transactions, partially offset by a 7% increase in average ticket; China comparable store sales were down 3%, with comparable transactions down 7%, partially offset by a 5% increase in average ticket; International and China comparable store sales are inclusive of a benefit from value-added tax exemptions of approximately 2% and 4%, respectively
- The company opened 480 net new stores in Q4, yielding 4% year-over-year unit growth, ending the period with 32,660 stores globally, of which 51% and 49% were company-operated and licensed, respectively
- Stores in the U.S. and China comprised 61% of the company’s global portfolio at the end of Q4, with 15,337 and 4,706 stores, respectively
- Consolidated net revenues of $6.2 billion declined 8% from the prior year primarily due to lost sales related to the COVID-19 outbreak
- Lost sales of approximately $1.2 billion relative to the company’s expectations before the outbreak included the effects of modified operations, reduced hours, reduced customer traffic and temporary store closures(1)
- GAAP operating margin of 9.0%, down from 16.1% in the prior year primarily due to the COVID-19 outbreak, mainly sales deleverage, material investments in retail partner support and other items; GAAP operating margin was also adversely impacted by the Americas store portfolio optimization expenses
- Non-GAAP operating margin of 13.2%, down from 17.2% in the prior year
- GAAP earnings per share of $0.33, down from $0.67 in the prior year primarily due to unfavorable impacts related to the COVID-19 outbreak totaling approximately -$0.35 per share(1) (2)
- Non-GAAP earnings per share of $0.51, down from $0.70 in the prior year
- Starbucks® Rewards loyalty program 90-day active members in the U.S. increased to 19.3 million, up 10% year-over-year
Global Store Status
At the end of Q4 FY20, approximately 98% of our global company-operated store portfolio was open, with 97% in the U.S. and 99% in China, as well as 99% in Japan and 97% in Canada. In the U.S. and China, limited or full lobby seating was available in approximately 63% and 90% of company-operated stores, respectively. As of the end of Q4 FY20, approximately 93% of our global licensed store portfolio was open. Within the U.S. and Canada licensed store portfolios, the remaining temporary closures were predominantly in airport, college and university locations.
Fiscal 2021 Guidance
The company introduces the following fiscal 2021 guidance for Q1 and the full year. Please note that Starbucks fiscal year 2021 is a 53-week year instead of the usual 52 weeks. The impact of the 53rd week will be reflected in our results for the fourth quarter of fiscal 2021. All full-year guidance for the metrics noted below is for fiscal year 2021 on a 53-week basis except comparable store sales growth metrics, which are relative to fiscal year 2020 on a 52-week basis.
Company Updates
1. In September, the company launched enhancements to its industry-leading Starbucks® Rewards loyalty program by giving members more payment options and ways to earn Stars through the Starbucks App. Now in company-operated stores in the U.S. and Canada, new and current Starbucks Rewards members are able to pay with cash, credit/debit cards or select mobile wallets and earn Stars toward free items without having to preload a Starbucks Card within the app.
2. As of the end of fiscal year 2020, the company had opened 581 net new stores in China, with 259 net new stores opened in the fourth quarter of fiscal 2020, representing a record-level pace of store development for Starbucks China. These net new store openings bring the China total store count to over 4,700 company-operated Starbucks stores.
3. As a part of the company's commitment to 100% ethically sourced coffee, Starbucks announced the new Starbucks Digital Traceability tool. By scanning a code on the coffee bag or entering a serial number, the tool transforms each bag of coffee beans into a digital passport, launching coffee lovers on a virtual expedition to meet farmers, roasters and baristas and to explore coffee-growing regions around the world.
4. As a continuation of the company’s passion and commitment to a more sustainable future, Starbucks joined the new “Transform to Net Zero” initiative as one of nine founding members. The initiative’s objective is to accelerate the transition to a net-zero emissions global economy no later than 2050.
5. As a part of its ongoing commitment to advancing racial and social equity, Starbucks announced several new actions it will take on its journey to that commitment. The company committed to setting annual Inclusion and Diversity goals based on retention rates and progress toward achieving Black, Indigenous and People of Color (BIPOC) representation of at least 30% at all corporate levels and at least 40% in all retail and manufacturing roles by 2025.
6. The Board of Directors declared a cash dividend of $0.45 per share, an increase of 10%, payable on November 27, 2020 to shareholders of record as of November 12, 2020. This declaration marks the tenth consecutive annual dividend increase for the company.
At the end of Q4 FY20, approximately 98% of our global company-operated store portfolio was open, with 97% in the U.S. and 99% in China, as well as 99% in Japan and 97% in Canada. In the U.S. and China, limited or full lobby seating was available in approximately 63% and 90% of company-operated stores, respectively. As of the end of Q4 FY20, approximately 93% of our global licensed store portfolio was open. Within the U.S. and Canada licensed store portfolios, the remaining temporary closures were predominantly in airport, college and university locations.
Fiscal 2021 Guidance
The company introduces the following fiscal 2021 guidance for Q1 and the full year. Please note that Starbucks fiscal year 2021 is a 53-week year instead of the usual 52 weeks. The impact of the 53rd week will be reflected in our results for the fourth quarter of fiscal 2021. All full-year guidance for the metrics noted below is for fiscal year 2021 on a 53-week basis except comparable store sales growth metrics, which are relative to fiscal year 2020 on a 52-week basis.
- Global comparable store sales growth of 18% to 23%
- Americas and U.S. comparable store sales growth of 17% to 22%
- International comparable store sales growth of 25% to 30%
- China comparable store sales growth of 27% to 32%
- Approximately 2,150 new store openings and 1,100 net new Starbucks stores globally
- Americas approximately 850 new store openings and approximately 50 net new stores
- International approximately 1,300 new store openings and 1,050 net new stores
- Approximately 600 net new stores in China
- Consolidated revenue of $28.0 billion to $29.0 billion, inclusive of a $500 million impact attributable to the 53rd week
- Channel Development revenue of $1.4 billion to $1.6 billion
- Consolidated GAAP operating margin of 14% to 15%
- Consolidated Non-GAAP operating margin of 16% to 17%
- Interest expense of approximately $470 million to $480 million
- GAAP and non-GAAP effective tax rates in the mid-20%s
- GAAP EPS in the range of $0.32 to $0.37 for Q1 and $2.34 to $2.54 for full year, inclusive of a $0.10 impact attributable to the 53rd week
- Non-GAAP EPS in the range of $0.50 to $0.55 for Q1 and $2.70 to $2.90 for full year, inclusive of a $0.10 impact attributable to the 53rd week
- Capital expenditures of approximately $1.9 billion
Company Updates
1. In September, the company launched enhancements to its industry-leading Starbucks® Rewards loyalty program by giving members more payment options and ways to earn Stars through the Starbucks App. Now in company-operated stores in the U.S. and Canada, new and current Starbucks Rewards members are able to pay with cash, credit/debit cards or select mobile wallets and earn Stars toward free items without having to preload a Starbucks Card within the app.
2. As of the end of fiscal year 2020, the company had opened 581 net new stores in China, with 259 net new stores opened in the fourth quarter of fiscal 2020, representing a record-level pace of store development for Starbucks China. These net new store openings bring the China total store count to over 4,700 company-operated Starbucks stores.
3. As a part of the company's commitment to 100% ethically sourced coffee, Starbucks announced the new Starbucks Digital Traceability tool. By scanning a code on the coffee bag or entering a serial number, the tool transforms each bag of coffee beans into a digital passport, launching coffee lovers on a virtual expedition to meet farmers, roasters and baristas and to explore coffee-growing regions around the world.
4. As a continuation of the company’s passion and commitment to a more sustainable future, Starbucks joined the new “Transform to Net Zero” initiative as one of nine founding members. The initiative’s objective is to accelerate the transition to a net-zero emissions global economy no later than 2050.
5. As a part of its ongoing commitment to advancing racial and social equity, Starbucks announced several new actions it will take on its journey to that commitment. The company committed to setting annual Inclusion and Diversity goals based on retention rates and progress toward achieving Black, Indigenous and People of Color (BIPOC) representation of at least 30% at all corporate levels and at least 40% in all retail and manufacturing roles by 2025.
6. The Board of Directors declared a cash dividend of $0.45 per share, an increase of 10%, payable on November 27, 2020 to shareholders of record as of November 12, 2020. This declaration marks the tenth consecutive annual dividend increase for the company.
Starbucks (SBUX) stock price history over the last 5 years
The image below shows the stock price history of Starbucks (SBUX) over the last 5 years. And its been a decent good time for Starbucks (SBUX) stockholders over the last 5 years. 5 years ago the stock of Starbucks was trading at $50.02 and its currently trading at $95.88. That's a return of 91.7% provided to Starbucks stockholders over the last 5 years.
The stock of Starbucks is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Starbucks (SBUX) stock is positive at this point in time.
The stock of Starbucks is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of Starbucks (SBUX) stock is positive at this point in time.
Starbucks (SBUX) vs Dunkin' Brands (DNKN) vs Restaurant Brands (QSR) over last 5 years
The image below shows the stock price history of Starbucks (SBUX) vs Dunkin' Brands (DNKN) vs Restaurant Brands (QSR) over last 5 years. All three firms are active in the coffee making and snacks industry. The summary below shows the stock price return of the three stocks in question.
The stock of Dunkin Brands has easily outperformed that of Starbucks and Restaurant Brands over the last 5 years.
- Dunkin Brands (DNKN): 152.62%
- Starbucks (SBUX): 91.7%
- Restaurant Brands (QSR): 57.6%
The stock of Dunkin Brands has easily outperformed that of Starbucks and Restaurant Brands over the last 5 years.
Recent coverage of Starbucks (SBUX)
The extract below covers the latest regarding Starbucks as obtained from Investopedia.com
What Happened
Starbucks posted adjusted EPS in Q4 FY 2020 that surpassed analysts' expectations. Revenue was also higher than forecast, but same-store sales declined by more than expected. Adjusted EPS and revenue also fell compared to the year-ago quarter amid the ongoing COVID-19 pandemic. Starbucks noted that it opened 480 net new stores during the quarter.
What to Look For
Starbucks Corp. (SBUX) has seen its same-store sales, earnings, and revenue plunge as COVID-19 forced store closures this spring, and as many customers have stayed away even as most of the chain's outlets have reopened. Surging drive-through sales have failed to offset the declines.
Investors will be watching for signs of recovery when Starbucks reports earnings on October 29, 2020 for Q4 FY 2020.2 The company's fiscal year (FY) ended in September. Analysts expect adjusted earnings per share (EPS) and revenue to decline.
Investors also will focus on Starbucks' same-store sales growth, a key metric used in the retail industry to gauge the ability of a company's established stores to generate revenue growth. Analysts expect same-store sales growth to fall year over year (YOY) for the third straight quarter as the coronavirus continues to spread.
Shares of Starbucks were roughly keeping pace with the broader market in the few months leading up to the pandemic-induced market crash that began in the latter half of February. But they have been underperforming ever since. Starbucks' shares have provided a total return of 9.5% over the past 12 months, a few percentage points below the S&P 500's total return of 11.9%, as of October 26, 2020.
Read the full article here
What Happened
Starbucks posted adjusted EPS in Q4 FY 2020 that surpassed analysts' expectations. Revenue was also higher than forecast, but same-store sales declined by more than expected. Adjusted EPS and revenue also fell compared to the year-ago quarter amid the ongoing COVID-19 pandemic. Starbucks noted that it opened 480 net new stores during the quarter.
What to Look For
Starbucks Corp. (SBUX) has seen its same-store sales, earnings, and revenue plunge as COVID-19 forced store closures this spring, and as many customers have stayed away even as most of the chain's outlets have reopened. Surging drive-through sales have failed to offset the declines.
Investors will be watching for signs of recovery when Starbucks reports earnings on October 29, 2020 for Q4 FY 2020.2 The company's fiscal year (FY) ended in September. Analysts expect adjusted earnings per share (EPS) and revenue to decline.
Investors also will focus on Starbucks' same-store sales growth, a key metric used in the retail industry to gauge the ability of a company's established stores to generate revenue growth. Analysts expect same-store sales growth to fall year over year (YOY) for the third straight quarter as the coronavirus continues to spread.
Shares of Starbucks were roughly keeping pace with the broader market in the few months leading up to the pandemic-induced market crash that began in the latter half of February. But they have been underperforming ever since. Starbucks' shares have provided a total return of 9.5% over the past 12 months, a few percentage points below the S&P 500's total return of 11.9%, as of October 26, 2020.
Read the full article here
Starbucks (SBUX) 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 4th quarter 2020 earnings report and their guidance provided our valuation model provides a target price (full value price) for Starbucks (SBUX) at $71.20 a stock. 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 price (full value price) which in this case is $71.20. A good entry point into Starbucks would therefore be at $64.10 or below.
We expect the stock of Starbucks (SBUX) to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months. We therefore rate the stock of Starbucks as a sell.
We recommend that long term fundamental and value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $71.20. A good entry point into Starbucks would therefore be at $64.10 or below.
We expect the stock of Starbucks (SBUX) to pull back from current levels to levels closer to our target price (full value price) in coming weeks and months. We therefore rate the stock of Starbucks as a sell.
Next earning release of Starbucks (SBUX)
It is expected that Starbucks will release their 1st quarter 2021 earnings report towards the end of January 2021