Starbucks 1st Quarter Earnings
Posted on: January 30, 2009 - Email Article - Printable Version
On Wednesday January 28th, 2009, Starbucks Corporation[SBUX: 24.58, +0.90 (+3.80%)] released first quarter fiscal 2009 earnings that disappointed many investors and the Street. Starbucks reported earnings per share of $0.09 o
n net income of $64.3 million. The company posted revenue of $2.62 billion. This is down 69 percent from net income of $208.1 million, or $0.28 per share a year earlier. Analysts projected earnings per share of $0.11 on revenue of $2.70 billion.
During this treacherous quarter the Company experienced a steep decline in comparable same store sales of 9 percent due to a 6 percent decrease in consolidated net revenues. On top of that the Company recognized $75.5 million in pre-tax restructuring charges. This can be attributed to the U.S. store closing which impacted this quarters earnings by$0.06. For the quarter, U.S. total net revenues were $2.0 billion, a decline of $121 million, or 6 percent. U.S. comparable stores sales declined 10 percent mostly due to the fact that there was a significantly lower volume of transactions. International total net revenues were $495.7 million, down $45.1 million, or 8 percent, compared with the same period last year. This decrease is the side effect of the U.S. dollar gaining strength against the British Pound and Canadian Dollar. Internationally, comparable same store sales were also weak coming in at a decrease of 3 percent. For the Global Consumer Products Group, total net revenues increased by 14 percent, or $13.7 million, to $114.3 million for the first quarter of fiscal 2009. This is due primarily to increased sales of packaged coffee to its distributors.
Now instead of looking at all the negatives that impacted Starbucks this quarter, lets look at what the Company is planning to do going forward.
- In an attempt to control costs going forward and improve their financial position Starbucks is planning on closing 200 domestic stores and 100 international stores. These stores are expected to be closed throughout fiscal year 2009. These store closings are in addition to the 600 domestic stores and 61 Australian stores that were planned to be closed in July 2008.
- The Company also announced to reduce the number of company operated new stores to 140 from a previous target of 200. Internationally, Starbucks now plans to open 170 new stores in fiscal 2009, down from their previous expectation to open 270 new stores.
- Starbucks anticipates that the store closures, in conjunction with reduced store openings for fiscal 2009 could result in up to a reduction of 6000 store positions throughout the course of 2009. On a positive note, the Company has stated that it will attempt to place as many of those affected in different positions within the organization.
Starbucks has originally anticipated a targeted cost reduction of $400 million for the new fiscal year but after the announcement of these new cost cutting measures they have raised their targeted savings to $500 million.
So looking forward, Starbucks has not released any guidance. I feel that is to be expected as we see many companies losing the ability to forecast their future performance. However, with Starbucks’ cost cutting initiatives they may be a company to look at as the market begins to rebound.
-Mahir Desai
Disclosure: None
The Following Stocks Were Mentioned In This Article: SBUX
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