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Beverage NewsTea and Coffee

Starbucks reports Q3 results

Company announces strategic actions to optimize store portfolio

Starbucks Logo
July 28, 2017

Starbucks Corp., Seattle, reported financial results for its 13-week fiscal third quarter and 39-week fiscal year to date ended July 2. Fiscal 2017 and fiscal 2016 GAAP results include items which are excluded from non-GAAP results.

“Starbucks leveraged food and beverage innovation, an elevated in-store experience and personalized digital connections to our customers to deliver another quarter of record financial and operating performance, despite the softness impacting our principal sectors overall,” said Kevin Johnson, Starbucks president and chief executive officer, in a statement. “Continued focus on execution against our strategic priorities enabled us to gain share and positions us well for the future.”

Starbucks Chief Finance Officer Scott Maw added: "Starbucks once again reported record operating and financial performance in Q3 — reflecting the back-half acceleration we've been anticipating. Nonetheless, despite posting record performance in Q3 and further extending our lead compared to the industry overall, the combination of trends in the quarter and ongoing macro pressures impacting the retail and restaurant sectors has us a bit more cautious going into Q4."

In the third quarter of fiscal 2017, Starbucks’ global comparable store sales increased 4 percent. Americas comp store sales increased 5 percent, driven by a 5 percent increase in the average ticket, the company says.

Consolidated net revenues grew 8 percent to a third-quarter record of $5.7 billion; up 9 percent after excluding $53.7 million of unfavorable foreign currency translation, it says.

The company opened 575 net new stores globally, bringing total store count to 26,736 across 75 countries, it says.

Additionally, membership in Starbucks Rewards increased 8 percent year-over-year, to 13.3 million active members. Starbucks Rewards represented 36 percent of U.S. company-operated sales, it adds.

Mobile Payment increased to 30 percent of transactions in U.S. company-operated stores, while mobile order and pay increased to 9 percent of transactions in U.S. company-operated stores, it says.

Starbucks also announced several strategic actions to optimize its store portfolio, strengthen its core, accelerate execution against its long-term growth strategy and further increase returns on capital.

The company announced plans to consolidate its business operations across Mainland China by acquiring the 50 percent of Shanghai Starbucks Coffee Corp. that it didn’t already own from JV partners Uni-President Enterprises Corp. and President Chain Store Corp. Customers in China have embraced the Starbucks brand and customer experience since the company opened its first store in the market 18 years ago. Starbucks stores in China are among the most innovative, coffee-forward Starbucks stores in the world, consistently generating strong revenue and same-store sales growth, record AUV’s and world-leading returns on investment. Mainland China is Starbucks largest and fastest growing international market with 2,800 stores in 130 cities, employing nearly 40,000 partners. Through this acquisition, the largest single acquisition in the company's history, Starbucks will assume 100 percent ownership of approximately 1,300 Starbucks stores in 25 cities in the Shanghai, Jiangsu and Zhejiang Provinces, it says.

Concurrent with the purchase of the East China JV, UPEC and PCSC will acquire Starbucks 50 percent interest in President Starbucks Coffee Taiwan Ltd. and assume 100 percent ownership of Starbucks operations in Taiwan, the company says. Founded in 1997, the Taiwan JV currently operates approximately 410 Starbucks stores in Taiwan.

In other news, many of the company’s principally mall-based Teavana retail stores have been persistently underperforming. Following a strategic review of the Teavana store business, the company concluded that despite efforts to reverse the trend through creative merchandising and new store designs, the underperformance was likely to continue, it says. As a result, Starbucks will close all 379 Teavana stores in the coming year, with the majority closing by Spring 2018. The approximately 3,300 partners impacted by these closures will receive opportunities to apply for positions at Starbucks stores, as Starbucks remains on track to create 240,000 new jobs globally and 68,000 in the United States during the next five years.

KEYWORDS: financial reports foodservice mergers and acquisitions Teavana

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