Starbucks (SBUX, Financial), the speciality coffee seller, reported strong second-quarter results recently. The U.S. business showed momentum, and it witnessed a strong performance in China. The U.S. comp sales were good during the quarter; net revenues and operating income increased by 6% and 8%. A 3% growth in global comparable store sales contributed to the revenue increase. There were increased sales of packaged coffee as well as higher international and foodservice sales.
Second-quarter performance
Consolidated net revenues during the quarter were $5.3 billion (which marked an increase of 6% from the prior-year quarter).
Consolidated operating income increased by 8% and was $935.4 million (which was $864.2 million in the prior-year quarter).
Consolidated operating margin expanded by 40 basis points and was 17.7%.
Americas segment
Net revenues for the Americas segment were $3.7 billion (which marked an increase of 8% from $3.4 billion the prior-year quarter)
Operating margin declined by 130 basis points and was 22.2% (which was 23.5% in the prior-year quarter).
Operating income during the quarter was $826.1 million (which marked an increase of 2% from $812.0 million in the prior-year quarter).
China/Asia Pacific segment
Net revenues for the China/Asia Pacific segment increased by 13% and were $768.9 million (which was $677.9 million in the prior-year quarter).
Operating income during the quarter was $175.9 million (which marked an increase of 36% from $129.3 million in the prior-year quarter).
Operating margin expanded by 380 basis points and was 22.9% (which was 19.1% in the prior-year quarter).
EMEA segment
Net revenues for the EMEA segment were $231.7 million (which marked a 14% decrease from the prior-year quarter).
Operating income during the quarter was $27.7 million (which was $27.6 million in the prior-year quarter).
Operating margin expanded by 170 basis points and was 12.0% (which was 10.3% in the prior-year quarter).
Channel Development segment
Net revenues for the Channel Development segment were $461.3 million in the second quarter.
Operating income during the quarter was $193.6 million (which marked an increase of 6% from $182.0 million in the prior-year quarter).
Operating margin expanded by 250 basis points and was 42.0% (which was 39.5% in the prior-year quarter).
Dividend
The company declared a cash dividend of 25 cents per share, payable on May 26 to shareholders of record as of May 11.
Focus
- Expanding its footprint on a global basis.
- Focusing on beverage business.
- Capitalize on markets like Brazil, Japan, India and China.
- Beverage, food and technology innovation.
Conclusion
This premiere roaster and retailer of specialty coffee has an array of products to offer – Starbucks, Teavana, Tazo, Seattle's Best Coffee, Evolution Fresh, La Boulange, Ethos, Starbucks VIA, Frappuccino, Starbucks Doubleshot, Starbucks Refreshers and Starbucks Discoveries Iced Café Favorites.
The coffee chain recently came up with an innovative social gifting feature in China that allows users to instantly give a Starbucks beverage or digital gift card. It boasts of social, digital and mobile applications that extend reach with customers and drive profitability. It is expanding in the China and Asia Pacific region by announcing Starbucks Teavana as a core offering to lift the modern tea experience specifically designed for the consumers of this region. It is constantly innovating the menu to cater to the tastes of Chinese customers. Tea being a $125 billion global category and the second-most consumed beverage in the world, second only to water, poses an immense growth opportunity for this brand. By the end of 2021, it plans to roll out 5,000 stores in China.
The management expects strong revenue growth in the second half of this year as well as in the future. The reward and loyalty app has already helped the company retain its customers. Active U.S. membership in Starbucks Rewards increased by 11% year over year and totaled 13.3 million members. Starbucks Rewards accounted for 36% of U.S. company-operated sales in the quarter with Mobile Payment representing 29% of transactions and Mobile Order and Pay increasing to 8% of transactions. The company delivered a record AUV and profit annually and is all geared up to deliver strong comp sales and revenue growth in the back half of fiscal 2017.
Adding this company may bring shareholder returns.
Disclosure: I do not hold any position in the company.
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