Starbucks Reports Record Q3 Fiscal 2021 Results

CoffeeNetwork (New York) - Starbucks Corporation (NASDAQ: SBUX) today reported financial results for its 13-week fiscal third quarter ended June 27, 2021.

Q3 Fiscal 2021 Highlights

• Global comparable store sales increased 73%, driven by a 75% increase in comparable transactions, partially offset by a 1% decrease in average ticket
• Americas comparable store sales increased 84%, driven by an 82% increase in comparable transactions and a 1% increase in average ticket; U.S. comparable store sales increased 83%, driven by an 80% increase in comparable transactions and a 1% increase in average ticket
• International comparable store sales increased 41%, driven by a 55% increase in comparable transactions, partially offset by a 9% decline in average ticket; China comparable store sales increased 19%, driven by a 30% increase in transactions, partially offset by a 9% decline in average ticket; International and China comparable store sales include adverse impacts of approximately 5% and 6%, respectively, from lapping prior-year value-added tax exemptions in China
• The company opened 352 net new stores in the third quarter of fiscal 2021, yielding 3% year-over-year unit growth, ending the period with a record 33,295 stores globally, of which 51% and 49% were company-operated and licensed, respectively
• Stores in the U.S. and China comprised 62% of the company’s global portfolio at the end of the third quarter of fiscal 2021, with 15,348 and 5,135 stores, respectively
• Consolidated net revenues of $7.5 billion grew 78% compared to the prior year, mainly driven by a 73% increase in comparable store sales primarily from lapping the unfavorable impact of business disruption in the prior year due to the COVID-19 pandemic and strength in U.S. company-operated sales in the current year
• GAAP operating margin of 19.9% increased from -16.7% in the prior year primarily driven by sales leverage from business recovery and the lapping of COVID-19 related costs in the prior year, as well as pricing in the Americas, partially offset by investments in wages and benefits for store partners; GAAP operating margin also benefited from higher restructuring activities in the prior year primarily associated with the Americas Trade Area Transformation
• Non-GAAP operating margin of 20.5%, up from -12.6% in the prior year
• GAAP earnings per share of $0.97, up from a loss of $0.58 in the prior year
• Non-GAAP earnings per share of $1.01, up from a loss of $0.46 in the prior year
• Starbucks® Rewards loyalty program 90-day active members in the U.S. increased to 24.2 million, up 48% year-over-year

Net revenues for the Americas segment grew 92% over Q3 FY20 to $5.4 billion in Q3 FY21, primarily driven by an 84% increase in company-operated comparable store sales driven primarily from lapping the unfavorable impact of business disruption in the prior year due to the COVID-19 pandemic and strength in U.S. company-operated sales in the current year.

Operating income increased to $1.3 billion in Q3 FY21, up from an operating loss of $404.9 million in Q3 FY20. Operating margin of 24.4% expanded 3,880 basis points, primarily driven by sales leverage from business recovery, the lapping of higher COVID-19 related costs in the prior year, pricing and benefits of the Americas Trade Area Transformation, partially offset by investments in wages and benefits for store partners coupled with increased supply chain costs due to inflationary pressures. The pandemic-related costs incurred in the prior year were largely catastrophe and service pay for store partners, partially offset by government subsidies. Operating margin also benefited from lower restructuring expenses primarily associated with the Americas Trade Area Transformation.

Net revenues for the International segment grew 75% over Q3 FY20 to $1.7 billion in Q3 FY21, driven by a 41% increase in comparable store sales primarily due to lapping the impact of the COVID-19 pandemic in the prior year, higher product sales to and royalty revenues from our licensees including the lapping of temporary royalty relief granted in the prior year, 1,175 net new store openings, or 8% store growth, over the past 12 months, and a 10% favorable impact from foreign currency translation.

 

Operating income increased to $318.3 million in Q3 FY21 compared to an operating loss of $86.0 million in Q3 FY20. Operating margin of 19.2% increased from -9.1% in the prior year, primarily driven by sales leverage due to lapping the severe impact of the COVID-19 pandemic, including temporary royalty relief to international licensees and higher catastrophe wages in the prior year and, to a lesser extent, labor efficiencies across company-operated markets and favorability from higher temporary government subsidies.

Q4 Fiscal 2021 Guidance

The company introduces the following Q4 fiscal 2021 guidance:

• Global comparable store sales growth of 18% to 21%
• Americas and U.S. comparable store sales growth of 22% to 25%
• International comparable store sales growth in the mid to high single-digits
• China comparable store sales growth roughly flat

Full Year Fiscal 2021 Guidance

The company updates the following fiscal year 2021 guidance:

• Global comparable store sales growth of 20% to 21%
  
  • (previously 18% to 23%)
• Americas and U.S. comparable store sales growth of 21% to 22%
  
  • (previously 17% to 22%)
• International comparable store sales growth of 15% to 17%
  
  • (previously 25% to 30%)
• China comparable store sales growth of 18% to 20%
  
  • (previously 27% to 32%)
• Americas approximately 800 new store openings and approximately zero net new stores
  
  • (previously approximately 850 new store openings and approximately 50 net new stores)
• International approximately 1,350 new store openings and 1,100 net new stores
  
  • (previously approximately 1,300 new store openings and 1,050 net new stores)
• Consolidated revenue of $29.1 billion to $29.3 billion, inclusive of a $500 million impact attributable to the 53rd week
  
  • (previously $28.5 billion to $29.3 billion, inclusive of a $500 million impact attributable to the 53rd week)
• Channel Development revenue of $1.5 billion to $1.6 billion
  
  • (previously $1.4 billion to $1.6 billion)
• Consolidated GAAP operating margin of approximately 17%
  
  • (previously 15% to 16%)
• Consolidated non-GAAP operating margin of approximately 18%
  
  • (previously 16.5% to 17.5%)
• GAAP and non-GAAP effective tax rates in the low 20%s
  
  • (previously low to mid-20%s)
• Capital expenditures of approximately $1.7 billion
  
  • (previously approximately $1.9 billion)
• GAAP EPS in the range of $2.97 to $3.02, inclusive of a $0.10 impact attributable to the 53rd week
  
  • (previously $2.65 to $2.75, inclusive of a $0.10 impact attributable to the 53rd week)
• Non-GAAP EPS in the range of $3.20 to $3.25 inclusive of a $0.10 impact attributable to the 53rd week
  
  • (previously $2.90 to $3.00, inclusive of a $0.10 impact attributable to the 53rd week)

The company reiterates the following fiscal year 2021 guidance:

• Approximately 2,150 new store openings and 1,100 net new Starbucks stores globally
• Approximately 600 net new stores in China
• Interest expense of approximately $470 million to $480 million

Alexis Rubinstein