Starbucks Third Quarter results fall short of expectations

Starbucks released its third quarter results on 26 July, announcing lowered 2012 full-year earnings due to “global economic conditions”.  While the results showed total net revenues at US$3.3 billion, this was slightly less than anticipated. In its second quarter earnings report, Starbucks had anticipated revenue growth for the 2012 financial year in the low teens. Following these third quarter results, Starbucks dropped its revenue growth forecast to between 10 – 12 per cent.  “Despite coming in short of our expectations I am pleased with the increasing operating leverage we are seeing,” said Howard Schultz, Starbucks Chairman, President and CEO in a statement. “The fact that this was our 11th consecutive quarter of record results and the fact that we achieved the results in the face of high legacy commodity costs and challenging economic and consumer headwinds in key markets. I am confident that we are operating with the discipline, flexibility and customer centricity necessary to enable us to continue driving EPS growth in excess of revenue growth over the long run.” Starbucks' third quarter saw United States comparable store sales grow 7 per cent and global stores increase by 6 per cent. The company's operating income was reported to have increases 22 per cent to US$492 million.  The global coffee company opened 231 new net stores globally in the third quarter, including its 600th store in Mainland China. It also opened its first stores in FInland and Costa Rica.  Net revenues from the company's China/Asia Pacific Segment continue to show the strongest growth, with an increase of 31 per cent over the same period last year. The increase was attributed to 116 new company-operating stores that opened in the last 12 months, higher licensed store revenue and a 12 per cent increase in comparable store sales.  In Starbucks' Europe, MIddle East and Africa (EMEA) segment, net revenues increased by 9 per cent over a year ago. The increase was reported as primarily due to incremental revenues from the consolidation of the Switzerland and Austria markets, although partially offset by unfavourable foreign currency exchange.  Back at home at Starbucks Americas segment, net revenues hit US$2.5 billion, an increase of 9 per cent over a year ago. The gain was attributed to a 7 per cent increase in comparable store sales, 5 per cent increase in the number of transactions, and 2 per cent increase in average ticket. Licensed store revenue growth of 24 per cent also contributed to the Americas results.  Looking ahead to 2013, Starbucks said it would accelerate its growth by opening around 1200 new stores globally, which would represent 20 per cent growth over fiscal 2012. Of those stores, around 600 will be in the Americas (mostly in the United States), while 500 will open in China/Asia Pacific and 100 in the EMEA region.   

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