Investor Relation about Starbucks
Written By: Amanda Yan
Everyday people wake up early in the morning and are in need of caffeine to keep themselves awake. Oftentimes, people will drive by the most iconic and famous coffee shop that can satisfy their needs. The famous grab and go breakfast and iconic drink shop is Starbucks. Starbuck was started in 1971 by the three college friends Jerry Baldwin, Zev Siegl, and Gordon Bowker. Before it was a coffee shop, it started out as a coffee bean retailer and roaster. Starbucks was not the first coffee shop that existed, as the three college friends were inspired by Alfred Peet, the founder of Peet’s Coffee, and Tea, who influenced their coffee roasting techniques. Later on, Howard Schultz joined Starbucks and began their development of the coffee house concept, which led to the company’s expansion into a global brand. After Schultz joins the Starbuck company, a different road has led him to another discovery. On the trip to Milan, Howard first experienced Italy’s coffeehouses, and had returned to Seattle inspired to show the artist of its coffee culture to Starbucks. Years later, Starbucks soon expanded to Chicago and Vancouver, Canada and then to California, Washington, D.C., and New York. By 1996, Starbucks had been distributed to different countries as the first store was open in Japan. It was then spread to Europe and China by the late 1900s. Over the decades, millions of customers each week come to enjoy Starbucks’ coffee style and flavor.
Starbucks so far operates in a coffee and snack shop industry, which is the border food services industry. It is also a beverage retail, as it packages coffee, tea, and iconic refreshers. They also play in the consumer cyclical secretary and restaurants industry. The three line items would include global comparable store sales, operating income, and operating margin. In the global comparable store sales, the line items cracks the revenue generated by stores that have been open for at least a year. In Q4 FY25, the global comparable stores sales had declined 7% because of the decreased transaction, but partially offset by a slight increase in the average ticket amount. This shows that even though customers were spending more on average, the number of transactions was significantly lower, impacting overall revenue. In the operating income, this reflects the company’s profitability before account for interest and taxes. Based on Q2 FY25, operating income has decreased from $1.1 billion to $748.3 million, and this is a decrease of over 30%. This decline had shown a decrease in license store business and additional labor costs. The operating margin is a percent that shows how much profit a company makes on a dollar revenue. Based on Q2 FY25, the operating margin contracted from 18.0% to 11.6%, showing that the company’s profitability declined significantly compared to the previous years. This contraction is primarily due to the deleverage and increased labor costs.
The ongoing Starbucks instigate is focused on enhancing the customer experience, improving employee well-being, and driving internal efficiency. The Starbucks company is prioritizing sustainability and belonging, which is one of the goals to a more environmentally responsible and inclusive company. Some customer experiences would be revisiting store designs and amenities that could create a welcoming atmosphere and cater to customer preferences. Improving store experiences would be reducing wait time to ensure a clear store layout and fostering a better customer connection. Not only would Starbucks want to improve customer well being, but also they aim to provide personalized services that match the consumers’ needs. Additionally, Starbucks will also enhance the best job in retail as they plan to pay double paternal leave for uS retail teams, which promotes 90% of retail leadership roles to ensure internal promotion opportunities for employees. As of now, the company is implementing initiatives to refocus on its core values, which includes a new mission of sustainability and belonging. Therefore, Starbucks is working on reducing its carbon footprint and conserving water starting on coffee farms.
Starbucks recent performance shows a mix as they can see some revenue growth and some decline. For instance in Starbucks’ Q2 earnings and revenues was adjusted EPS at $0.41 verus a projected $0.49 and a revenue of $8.76 billion versus a projected $8.38 billion. So far Starbucks has a debt of over $25 billion, however, the company demonstrates strong liquidity with operating cash flow of $6.1 billion and levered free cash flow of $2.15 billion. Starbucks’ negative equity situation is due to extensive share purchases where they used profits and borrowed funds to buy shares which caused the changes in the company. In North America, the segment saw a 1% decrease in net revenues in Q1 FY25 which is the decline in comparable store sales and transactions. This could mean that most of the revenue may come from other countries. Of the Starbucks across the globe, the company is in a financial situation, which declines same-store sales and a stock price to drop.
