On paper, the company’s first-quarter results look strong. Net income for the quarter ended Dec. 31, 2017, spiked to $2,250.2 million, equal to $1.57 per share on the common stock, compared with earnings of $751.8 million, or $0.51 per share.
Sales for the quarter totaled $4,741.8 million, which compared with $4,469.3 million the previous year.
Operating income for the quarter fell 1.5 percent to $1,161.1 million from $1,132.6 million during the same period of the previous fiscal year.
|Kevin Johnson, CEO and president of Starbucks|
“We ended Q1 with 6 percent revenue growth and 2 percent comp growth in the US,” said Kevin R. Johnson, CEO and president, Jan. 25 during a conference call with financial analysts. “Continued strength in throughput at peak and strong digital performance were noteworthy highlights in the quarter. But we recognized that overall, our US operating performance fell short of expectation.”
Issues that pressured Starbucks’ results during the quarter included weaker holiday season sales of gift cards and merchandise, and softness in the number of visits by non-Starbucks Rewards customers.
“We continue to reap the benefits of the success of our efforts to increase throughput at peak,” Johnson said. “Specifically, our highest peak volume stores continued to out-comp the average for our US portfolio overall, with efforts around staffing, technology and lean principles all yielding measurable results. We've now seen three successive quarters of sustained positive comp growth at peak and believe that planned enhancements will continue this trend and are encouraged by our ability to have so quickly rallied our store partners, equipped them with the tools, technology and resources to successfully improve operations.
Some of the initiatives underway to improve afternoon traffic include expanding the new Mercato food menu from two markets to six in fiscal 2018. The company also plans to expand its Nitro Cold Brew program from 1,300 stores to 2,300 stores in the United States.
“Our plant-based beverage platform continues to expand, leveraging almond, coconut and soymilk alternatives. Our refreshment platform, including tea and Starbucks Refreshers, contributed comp growth again this quarter. These beverage platforms also align with our focus on the afternoon occasion.”
A bright spot for the company during the quarter was its business in its China/Asia Pacific business unit. Sales rose 9 percent during the quarter to $843.7 million, primarily driven by revenues from 1,033 new stores that opened during the past 12 months. Operating income during the quarter rose 20 percent to $196.8 million, primarily due to sales and favorable foreign currency translation.
Based on its first-quarter results, Starbucks updated its financial and operating targets for the year.
|Scott Maw, CFO and principal accounting officer for Starbucks|
“We still expect consolidated revenue growth in the high single digits, excluding approximately 4 points of favorability from the East China acquisition and a roughly 2-point reduction from other streamline activities,” said Scott Harlan Maw, chief financial officer and principal accounting officer. “We also still expect comps to grow 3 percent to 5 percent for the year, consistent with our long-term guidance.
“Given the challenges in Q1 and expectations for a somewhat softer Q2, we expect to be near the low end of comp guidance range for the year. Given the margin contraction in the first quarter and likely pressure on Q2, we now anticipate a slight operating margin decrease for both total company and the Americas for the full year before the additional partner and digital investments.”