|Kevin Johnson, president and CEO of Starbucks|
“We are very proud of our performance since (2010), more than doubling revenues, tripling earnings, quadrupling market cap and increasing store count by over 10,000 locations globally,” Kevin R. Johnson, president and CEO, said during a Nov. 2 conference call with analysts. “Our strategic planning process serves as the basis of our long-term financial outlook and is informed by three guiding principles.”
The three guiding principles described by Johnson include a commitment to delivering well above industry average comp, revenue and profit growth; a commitment to streamlining the business; and a commitment to a value-creation strategy.
“With those principles in sharp focus, we challenged ourselves to balance the growth opportunity ahead with the headwinds confronting all retailers, particularly brick-and-mortar and restaurant retailers, our results over the past two years and the need to continue investing for growth,” he said.
“First, we are committed to investing in our future, specifically as it relates to partners, food and beverage innovation, digital innovation and Starbucks Reserve,” he explained. “Second, we are adapting our cost structure to align with this new long-term guidance with focus on G&A and the middle of the P&L. Third, we are streamlining our business and directing our investments toward businesses and operations where our growth prospects and returns are the greatest, while transitioning, whether by licensing, divestiture or otherwise, businesses and operations where returns and long-term growth prospects are less attractive. Examples of recent streamlining activity include almost doubling our company-owned operations in Mainland China through the pending purchase of the remaining 50 percent of our East China operations, moving our businesses in Singapore, Germany and Taiwan, approximately 700 stores in aggregate, to a 100 percent licensed market model; initiating the closure of all Teavana retail stores; selling Tazo in order to focus on Teavana as our premium tea brand; and eliminating our Starbucks e-commerce operation in order to better leverage our channel partners. Starbucks’ future returns will increasingly benefit from our ongoing initiatives to further streamline our business.”
Starbucks on Nov. 2 said it had entered a definitive agreement to sell the Tazo brand to London-based Unilever PLC for $384 million. Starbucks purchased Tazo in 1999 for $8.1 million.
Starbucks’ release of its new long-term financial targets comes against a backdrop of another strong financial year. In the fiscal year ended Oct. 1, net income totaled $2,884.7 million, equal to $1.97 per share on the common stock, up 2.4 percent from $2,817.7 million, or $1.90 per share, in fiscal 2016. Net revenues increased 5 percent to $22,386.8 million from $21,315.9 million.
“Our food program continues to grow and expand, with food mix now over 21 percent for the first time ever in Q4, giving us confidence that we will reach our target of 25 percent food mix by 2021,” Johnson said.
|John Culver, president of International and Channels for Starbucks|
John Culver, president of International & Channels, added, “We’re seeing good strong growth on breakfast sandwiches. We’re seeing good strong growth on Sous Vide Egg Bites. We now have that available in all our stores across the US. And then the last areas in the protein bistro boxes and the impact that those are having. So we remain bullish on the existing stores and continue to drive more innovation into it, whether that is related to coffee, whether that’s related to food or whether that’s related to the digital experience.”