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Starbucks Q4 2014 Earnings: Looking Beyond the Numbers

November 01, 2014 | About:

The American coffeemaker Starbucks (NASDAQ:SBUX) saw its share tumble 5% after the company reported its fourth quarter 2014 earnings. While earnings per share were better than analyst estimates, revenue came in weaker than what the consensus had predicted. Let’s check out the quarter report a bit in details and look beyond the numbers to find out if the coffer brewer is on the right track.

Source: Starbucks

A look at the quarter
Starbucks chief executive Howard Schultz looked quite happy with the company’s fiscal year performance and said, “Starbucks performance in fiscal 2014 was extraordinary by any metric or comparison.” In the last quarter, the coffeemaker reported consolidated net revenue of $4.18 billion, up 10% year on year. However, analysts had forecast the revenue to come around $4.24 billion. The Seattle-based company operating income was also healthy at $854.9 million with an operating margin of 20.4% for the period. The company reported earnings per share of $0.74, a rise of 17.5% over last year comparable period, but slightly shy of analyst expectation.

One of the most important metric, global comparable store sales, improved 5%. The coffeehouse chain was happy to note that this was the 19th subsequent quarter when its comparable store sales climbed north of 5%. However, this wasn’t good enough for the Wall Street as it had expected it to go up even further. Starbucks expects the metric grow even higher in 2015. Schultz confirmed that it wasn’t competition or product mixed that made the coffeemaker see lower than expected growth. It was rather the changing consumer behavior who are getting more comfortable with online shopping. This has led to lower footfall in malls as well as the main street which is precisely having a bearing on majority of the retailers. Starbucks does have a plan to counter such lull. "We are addressing with great avengeance, technology and delivery,'', said the chief executive.

Source: Starbucks

The company announced a dividend hike of 23% as Schultz is confident about strong operational performance in 2015. The next fiscal year outlook appears very encouraging with top line growing in the range of 16% to 18%.

The urge to expand further
Starbucks’ expansion program remains very smooth – in the last quarter of 2014 it opened 503 new stores which brings its total number of stores across 65 nations to 21,366. During the entire fiscal year, the company added 1,599 stores. Apart from this, in September the company expressed its interest in acquiring an outstanding stake of 60.5% in Starbucks Coffee Japan for an amount of $914 million. Japan happens to be one of the strong markets of the company, so this step should help in boosting future growth.

Starbucks overall performance in fiscal year 2014 reflects the coffee company’s ability to sustain growth amid rising competition and changing trends. However, the urge to expand and grow continues to remain one of the key priorities of the company. As consumer likings and preferences keep shifting in favor of greater convenience and superiority, Starbucks is working out ways to fulfill their demands accordingly. The company plans to focus its investments in lucrative and meaningful areas such as mobile commerce, and other feasible ways that can add to customers’ convenience.

Parting thoughts
The fourth quarter results are a good indicator of Starbucks’ brilliance to change with changing times. While other chains including McDonald’s (NYSE:MCD), Yum! Brands (NYSE:YUM) are in trouble as foot fall is getting weaker, Starbucks is being proactive to manage smoothly with the changes. The company’s business operations have stayed quite strong across various parts of the world and each of its segments have generated profitable results. With robust innovation up its sleeves, and investments in the right avenues, Starbucks looks poised to take its brand recognition and growth prospects to a higher pedestal.

About the author:

Quick Pen
A seasoned writer with keen interest in the automotive, technology, telecommunication, retail and aerospace sectors.

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