Global Market Presence and Expansion - Starbucks operates in 87 markets globally, with a focus on expanding its global store base in both developed and higher growth markets[14] - Total company-operated stores increased by 1,426 to 21,018 in fiscal 2024, with North America adding 533 stores and International adding 893 stores[32] - The company operates in 87 global markets, facing risks from differing cultural, regulatory, geopolitical, and economic environments[82] - International operations are subject to risks such as economic uncertainties, trade restrictions, and delays in store openings, which could negatively impact net revenues and earnings per share[82][83] - The company's China MBU is its second-largest market and is 100% company-operated, contributing significantly to consolidated and international net revenues and operating income[79] - The company faces risks in China, including a highly competitive retail environment, changes in economic conditions, and U.S.-China relations[79] - The company's international operations may face higher occupancy costs and store operating expenses compared to the U.S. due to higher rents and market-specific regulatory requirements[81] Ethical Sourcing and Sustainability - Over 98% of Starbucks coffee is verified as ethically sourced through the C.A.F.E. Practices program[14] - Starbucks operates ten farmer support centers globally, including one in China's Yunnan Province, to ensure the future supply of high-quality green coffee[43] - Starbucks is expanding its use of reusable packaging to reduce landfill waste[44] - Starbucks may incur increased costs related to reducing carbon emissions, plastic use, and implementing sustainability goals, which could affect profitability[101] - Starbucks is subject to evolving ESG regulations, including the EU's Corporate Sustainability Reporting Directive (CSRD), which may increase compliance costs and risks[102] Employee Benefits and Diversity - Starbucks employs approximately 361,000 people worldwide, with 211,000 in the U.S. and 150,000 outside the U.S. as of September 29, 2024[25] - In the U.S., Starbucks' partner base is 70.9% female and 28.4% male, with diverse partners representing 51.9% of the retail team and 37.9% of corporate roles[20] - Starbucks offers 100% upfront tuition coverage for partners through the Starbucks College Achievement Plan and matches 5% of eligible contributions to the Future Roast 401(k) savings plan[21] - The company provides 100% paid parental leave and a Partner and Family Sick Time program for eligible partners working an average of 20 hours or more per week[23] - Starbucks has achieved racial and gender pay equity for U.S. partners performing similar work and is working toward global gender pay equity[25] - Approximately 5% of Starbucks partners in U.S. company-operated stores are represented by unions[25] - The company prioritizes inclusivity in recruitment and engagement, with initiatives like mentorship programs and efforts to address barriers to equal pay[19] - Labor costs are expected to increase due to federal and state legislation, including a minimum salary threshold increase effective July 1, 2024, and California's Assembly Bill 1228, which raises minimum wage and sets working condition standards[98] - Starbucks faces unionization efforts at hundreds of its 10,000+ U.S. company-operated stores, potentially leading to increased costs and operational complexity[98] Financial Performance and Revenue - North America segment accounted for 75% of total net revenues in fiscal 2024, while International and Channel Development segments contributed 20% and 5% respectively[28] - Company-operated stores generated 82% of total net revenues in fiscal 2024, with 52% of total stores being company-operated[31] - Beverages accounted for 74% of retail sales mix in company-operated stores for fiscal 2024, consistent with the previous two years[34] - Licensed stores contributed 12% of total net revenues in fiscal 2024, with a total of 19,181 licensed stores globally[37] - Total licensed stores increased by 735 to 19,181 in fiscal 2024, with North America adding 81 stores and International adding 654 stores[39] - Consolidated net revenues increased 1% to 36.2billioninfiscal2024comparedto36.0 billion in fiscal 2023, driven by net new company-operated store growth[134] - North America segment revenue increased 2% in fiscal 2024, with a 2% decline in comparable store sales and a 5% decline in comparable transactions[134] - U.S. market revenue increased 2% in fiscal 2024, with a 2% decline in comparable store sales and a 5% decline in comparable transactions[134] - International segment revenue declined 2% in fiscal 2024, with a 4% decline in comparable store sales and a 4% decline in average ticket[134] - Total net revenues increased 1% to 36.2billioninfiscal2024comparedto36.0 billion in fiscal 2023[139] - Consolidated operating income decreased to 5.4billioninfiscal2024comparedto5.9 billion in fiscal 2023, with operating margin contracting 130 basis points to 15.0%[140] - Diluted earnings per share (EPS) for fiscal 2024 decreased to 3.31,comparedtoEPSof3.58 in fiscal 2023[140] - Capital expenditures were 2.8billioninfiscal2024,upfrom2.3 billion in fiscal 2023[140] - Company-operated stores revenue increased 1% to 29.8billioninfiscal2024,drivenby1,426netnewstores,a727.0 billion in fiscal 2024, driven by 533 net new company-operated stores, a 5% increase[149] - North America operating income decreased 3% to 5.4billioninfiscal2024,withoperatingmargincontracting90basispointsto19.8149 million, or 2%, primarily due to unfavorable foreign currency translation impacts (252million)anda4210 million)[153] - International operating income for fiscal 2024 decreased 15% to 1.0billion,withoperatingmargincontracting220basispointsto14.2124 million, or 7%, primarily due to a decline in revenue in the Global Coffee Alliance (125million)[157]−ChannelDevelopmentoperatingincomeforfiscal2024decreased4926 million, with operating margin expanding 120 basis points to 52.3%[158] - Corporate and Other operating loss increased to 1.9billionforfiscal2024,or593 million) and partner wages and benefits (57million)[160]−Netrevenuesforfiscalyear2024reached36.18 billion, with company-operated stores contributing 29.77billion[194]−Licensedstoresgenerated4.51 billion in revenue for fiscal year 2024[194] - Operating income for fiscal year 2024 was 5.41billion,adecreasefrom5.87 billion in fiscal year 2023[194] - Net earnings attributable to Starbucks for fiscal year 2024 were 3.76billion,downfrom4.12 billion in fiscal year 2023[194] - Earnings per share (diluted) for fiscal year 2024 were 3.31,comparedto3.58 in fiscal year 2023[194] - Net earnings including noncontrolling interests for FY 2024 were 3,762.3million,adecreaseof8.84,124.7 million in FY 2023[197] - Comprehensive income attributable to Starbucks for FY 2024 was 4,109.9million,anincreaseof7.93,810.2 million in FY 2023[197] - Net earnings including noncontrolling interests for FY 2024 were 3,762.3million,adecreasefrom4,124.7 million in FY 2023[207] - Net cash provided by operating activities increased to 6,095.6millioninFY2024,upfrom6,008.7 million in FY 2023[207] - Additions to property, plant, and equipment were 2,777.5millioninFY2024,comparedto2,333.6 million in FY 2023[207] - Net cash used in investing activities was 2,699.2millioninFY2024,upfrom2,270.8 million in FY 2023[207] - Net cash used in financing activities was 3,718.2millioninFY2024,comparedto2,990.6 million in FY 2023[207] - Cash dividends paid increased to 2,585.0millioninFY2024from2,431.8 million in FY 2023[207] - Repurchase of common stock was 1,266.7millioninFY2024,upfrom984.4 million in FY 2023[207] - Net proceeds from issuance of long-term debt were 1,995.3millioninFY2024,comparedto1,497.8 million in FY 2023[207] - Cash and cash equivalents at the end of FY 2024 were 3,286.2million,downfrom3,551.5 million at the end of FY 2023[207] - Income taxes paid during FY 2024 were 1,373.3million,upfrom1,294.2 million in FY 2023[207] - Net earnings for the fiscal year ending October 2, 2022, were 4,124.5million,anincreasefrom3,281.6 million in the previous year[212] - Other comprehensive loss for the fiscal year ending October 2, 2022, was 314.3million,comparedto610.4 million in the previous year[212] - Stock-based compensation expense increased to 306.4millioninthefiscalyearendingOctober2,2022,from275.5 million in the previous year[212] - Repurchase of common stock in the fiscal year ending October 2, 2022, amounted to 548.6million,adecreasefrom890.8 million in the previous year[212] - Cash dividends declared increased to 2.16pershareinthefiscalyearendingOctober2,2022,from2.00 per share in the previous year[212] - Net earnings for the fiscal year ending October 1, 2023, were 3,760.9million,adecreasefrom4,124.5 million in the previous year[212] - Other comprehensive income for the fiscal year ending October 1, 2023, was 349.0million,comparedtoalossof314.3 million in the previous year[212] - Stock-based compensation expense increased to 312.0millioninthefiscalyearendingOctober1,2023,from306.4 million in the previous year[212] - Repurchase of common stock in the fiscal year ending October 1, 2023, amounted to 35.2million,asignificantdecreasefrom548.6 million in the previous year[212] - Cash dividends declared increased to 2.32pershareinthefiscalyearendingOctober1,2023,from2.16 per share in the previous year[212] Digital Innovation and Technology - Starbucks' digital platform drives innovation in beverage, equipment, process, and technology, enhancing the customer experience[14] - The company's investments in technology and digital engagement aim to transform and enhance the customer experience, but failure to execute these initiatives could harm financial results[72] - The company may face challenges in recruiting and retaining qualified technology developers, which are critical for digital growth initiatives[97] - The company relies heavily on information technology systems for operations, including point-of-sale processing, supply chain management, and mobile technology[113] - The company's incident response, disaster recovery, and business continuity plans may not resolve issues in an effective and timely manner, potentially causing material negative impacts[113] - The company's systems hardware, software, and services provided by third-party providers are not fully redundant within or across markets[113] - The company may be required to disclose cyber incidents before their full extent is known, potentially leading to uncertainty and reputational damage[113] - Starbucks' cybersecurity program is integrated with the Enterprise Risk Management framework and includes annual cybersecurity awareness training and phishing simulations[116] - The company maintains an incident response plan and insurance coverage to mitigate costs associated with cybersecurity incidents[118] - Starbucks' cybersecurity program is led by a senior vice president and chief information security officer with over 20 years of experience in information security[119] - The company's Board has ultimate cybersecurity and data privacy risk oversight responsibility, with the Audit Committee overseeing cybersecurity and technology risks[119] - The rapid evolution and increased adoption of artificial intelligence technologies may intensify cybersecurity risks[111] - The company has experienced cyber-attacks, including phishing, but these have not had a material impact on operations to date[109] Supply Chain and Commodities - The company purchases significant amounts of dairy and plant-based dairy-free alternatives, with the risk of non-delivery considered remote[43] - Increases in the cost or decreases in the availability of high-quality arabica coffee beans or other commodities could adversely impact business operations and financial results[55] - Increases in the cost of high-quality arabica coffee beans or other commodities could have a material adverse impact on profitability[87] - The supply chain may be unable to fully support current and future business needs, potentially leading to higher shipping costs and inventory write-offs[89] - Any material interruption in the supply chain, such as disruptions in roasted coffee supply, could negatively impact business and profitability[90] - Green coffee purchase commitments account for 86% of the company's total purchase obligations, which stand at 1.3billionasofSeptember29,2024[169]−A1021 million, while a 10% decrease could increase net earnings by 21million,basedonhedginginstrumentsasofSeptember29,2024[177]−A1024 million, while a 10% decrease could increase net earnings by 24million,basedonhedginginstrumentsasofSeptember29,2024[179]CompetitionandMarketRisks−Starbucksfacesdirectcompetitionfromlargecompetitorsinthequick−servicerestaurantsectorandtheready−to−drinkcoffeebeveragemarket,aswellasfromwell−establishedandstart−upcompaniesininternationalmarkets[45]−Thecompanyfacesintensecompetitioninthespecialtycoffeemarket,withpotentialimpactsoncustomertrafficandprofitability[99][101]−Thecompany′sfinancialresultscouldbeadverselyaffectedbyevolvingconsumerpreferences,includingshiftsinspendingawayfromoutside−the−homefoodandbeverages[72]−Thecompany′sgrowthdependsonopeningnewstoresprofitably,butcostshaveincreasedduetoconstructionlaborinflationandmaterialcosts[77]−Thecompany′sglobalbusinessstrategyreliesheavilyonbusinesspartners,includinglicensees,jointventurepartners,andthird−partymanufacturers[74]−ThecompanyreliesheavilyonNestleˊforthedistributionandmarketingofitspackagedgoodsandfoodserviceproducts,withpotentialadverseimpactsifNestleˊfailstoperform[86]−Thecompany′sbusinesscouldbeadverselyaffectedbylaborshortagesandincreasedcompetitionfortalentduetoalternativetelecommutingemploymentoptions[98]RegulatoryandLegalRisks−StarbucksissubjecttolawsandregulationsintheU.S.andmultipleforeignjurisdictions,withchangespotentiallyresultinginsignificantcostsbutnotexpectedtohaveamaterialeffectoncapitalexpendituresorcompetitiveposition[48]−Thecompanyisexposedtorisksfromchangingdataprivacyandprotectionlaws,includingGDPRandCCPA,whichmaylimitdatausageandresultinfinesorlitigation[105]−StarbucksissubjecttocomplexandevolvingU.S.andinternationalregulations,includingenvironmentallaws,whichcouldincreasecompliancecostsandcapitalexpenditures[105]−TheCaliforniaConsumerPrivacyAct(CCPA)hasbeenmodifiedbytheCaliforniaPrivacyRightsAct,effectiveJanuary2023,addingadditionalcomplianceobligations[109]−19otherU.S.stateshaveenacteddataprivacylegislationsimilartotheCCPA,with8ineffectbytheendof2024[109]−TheglobalminimumtaxunderPillarTwooftheOECD′sBaseErosionandProfitShiftinginitiativewillbeeffectiveforthecompanystartingfiscal2025[107]−TheNetherlandsimposesaflatconsumptiontaxof26.13Europer100Litersoncoldnon−alcoholicbeverages(non−milkbased)[107]FinancialRisksandMarketSensitivity−EconomicconditionsintheU.S.andinternationalmarketshaveadverselyaffected,andcouldcontinuetoadverselyaffect,thecompany′sbusinessandfinancialresults[56]−Macroeconomicfactors,includinginflationarypressures,changesininterestrates,andgeopoliticalinstability,couldadverselyaffectthecompany′sfinancialconditionandresultsofoperations[91][93]−Unfavorableeconomicconditionscouldleadtosupplierorlicenseeinsolvency,increasingbaddebtexpenseanddisruptingoperations[94]−Thecompany′sfinancialperformanceissensitivetochangesinconsumerdiscretionaryspending,withpotentialadverseeffectsfromeconomicdownturnsorrecessions[94]−A100basispointincreaseininterestratescoulddecreasethefairvalueofthecompany′slong−termdebtby943 million, as of September 29, 2024[181] Operational Risks - The loss of key personnel, difficulties with recruiting and retaining qualified personnel, or ineffectively managing changes in the workforce could adversely impact the business and financial results[57] - The company faces risks related to food safety, including potential product recalls, contamination, and negative publicity, which could materially harm its business[75] - The company's strategic initiatives include expanding its cold beverage business, increasing store footprint, and adjusting to changing customer preferences due to economic conditions[67] - The company is vulnerable to climate change impacts, including extreme weather events and supply chain disruptions[102] Financial Position and Capital Structure - Cash and investments were 3.8billionasofSeptember29,2024,withapproximately2.1 billion held in foreign subsidiaries[161] - The company has a $3.0 billion unsecured five-year revolving credit facility, with no amounts outstanding as of September 29, 2024[162]
Starbucks(SBUX)2024-11-20 21:08