Starbucks' (SBUX) CEO Howard Schultz Discusses Q3 2014 Results - Earnings Call Transcript
Starbucks (SBUX) Q3 2014 Results Earnings Call July 24, 2014 5:00 PM ET
Executives
JoAnn DeGrande – IR
Howard Schultz – Chairman, President and CEO
Troy Alstead – COO
Scott Maw – EVP and CFO
Adam Brotman – Chief Digital Officer
Cliff Burrows – Group President, U.S., Americas, and Teavana
John Culver – Group President, Starbucks Coffee China and Asia Pacific, Channel Development and Emerging Brands
Matt Ryan - Global Chief Strategy Officer
Analysts
Matt DiFrisco - Buckingham Research
Keith Siegner - UBS
Jeffrey Bernstein - Barclays
Joseph Buckley - Bank of America Merrill Lynch
Sara Senatore - Sanford Bernstein
David Tarantino - Robert W. Baird
Sara Senatore - Sanford Bernstein
John Glass - Morgan Stanley
Bonnie Herzog - Wells Fargo
John Ivankoe - JPMorgan
Brian Bittner - Oppenheimer
Jason West - Deutsche Bank
Operator
At this time, I would like to welcome everyone to Starbucks Coffee Company’s third quarter fiscal year 2014 earnings conference call. [Operator instructions.] Ms. DeGrande, you may begin your conference call.
JoAnn DeGrande
Thanks, operator. Good afternoon. This is JoAnn DeGrande, vice president of investor relations for Starbucks Coffee Company. Joining me on the call today to discuss our fiscal third quarter results are Howard Schultz, chairman, president, and CEO; Troy Alstead, COO; and Scott Maw, CFO. Also joining us for Q&A are Cliff Burrows, group president, US and Americas; John Culver, group president, China, Asia Pacific, and channel development; and Matt Ryan, global chief strategy officer, who is part of our digital team, along with Howard and Adam Brotman, our chief digital officer.
This conference will include forward-looking statements, which are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements. Any such statements should be considered in conjunction with cautionary statements in our earnings release and risk factor discussions in our filings with the SEC, including our last annual report on Form 10-K.
Starbucks assumes no obligation to update any of these forward-looking statements or information. Please refer to our website, at investor.starbucks.com to find a reconciliation of non-GAAP financial measures referenced in today’s call with our corresponding GAAP results.
This conference call is being webcast and an archive of the webcast will be available on our website later today.
Before I turn the call over to Howard, I would like to remind you again of our biennial investor day taking place the first week of December in Seattle. We’re in the early planning stages, and invitations will be sent in the fall. We hope you’ll be able to join us for the first conference in Seattle since 2006.
With that, I’d like to turn the call over to Howard.
Howard Schultz
Thank you, JoAnn, and welcome to everyone on today’s call. Starbucks Q3 represents another quarter of outstanding operating and financial performance around the world, demonstrating once again the power and relevancy of the Starbucks brand and the success and scalability of our business model and go-to-market strategies.
Today, over 300,000 Starbucks partners are serving over 70 million customers from almost 21,000 stores in 65 countries every week. I’m particularly pleased to report that each of our reporting segments delivered solid performance in Q3 and contributed to our accelerated 11% increase in revenues to $4.2 billion.
Particularly noteworthy is that our U.S. retail store business delivered comp growth of 7%, ahead of our own expectations and a stunning achievement on a base of over 6,800 stores against 9% comps in Q3 last year and in the face of continuing challenging U.S. economic and consumer environments.
Over the last two years, our U.S. business has produced revenue growth of over 22%. Our business in China, now approaching 1,300 stores, has never been stronger, contributing to a strong comp growth of 7% in China Asia Pacific. And EMEA demonstrated continued progress against transformation plan, delivering comp growth of 3% with key U.K. market comps outpacing the EMEA regions overall.
Globally, store comps grew 6%, our 18th consecutive quarter of comp store sales gains of 5% or more. Innovation and share expansion also drove strong gains in our premium single-serve packaged coffee and tea portfolios, contributing to a solid 13% increase in channel development revenues.
Overall, our operating performance in Q3 resulted in a 200 basis point expansion in our consolidated operating margin to a Q3 record of 18.5%, and a 22% increase in earnings per share to a Q3 record of $0.67 per share.
The results we announced today reflect the success of our strategies to innovate, identify new consumer need states, and day part opportunities and create innovative, highly differentiated, relevant products to satisfy those need states, all while maintaining a laser focus on our core coffee business.
I’m convinced that the continuing effort to execute against these strategies will enable us to drive further incrementality and deliver even stronger unit economics and greater profitability into the future.
Innovation has also been a key driver of Starbucks business, and today, deep trust in the Starbucks brand, our emotional connection to consumers around the world, and our scale afford us the opportunity to innovate beyond our core coffee business.
I previously shared our intent to reinvent the tea category, just as we did the coffee category, and we are making meaningful progress against our plan to do so. In Q3, we introduced both Teavana Oprah Chai and Teavana Shaken Iced Tea to tremendous customer response. Just last week, we opened our fourth new Teavana tea bar on Third Avenue and 63rd Street in Manhattan, and in the fall, we’ll be opening another iconic Teavana tea bar on Broadway and Ninth Street in New York City’s Greenwich Village.
These innovations are emblematic of the future vision we have for Teavana, and have drawn attention to the tea category, elevated the Teavana brand, and these new, innovative beverages have driven incrementality in both Starbucks and Teavana stores.
In addition, last month we introduced Fizzio, Starbucks’ brand of preservative-free, hand crafted, cold carbonated beverages in approximately 3,000 of our stores in the U.S. Sun Belt. Consumer response to Fizzio has been strong and following the successful test in both Japan and Singapore, we plan to introduce Fizzio in select international markets in the quarters ahead.
Teavana Oprah Chai, Teavana Shaken Iced Tea, and Fizzio are providing us with highly differentiated, hand crafted beverages that attract customers during afternoon and evening day parts and drive increased food attachment.
But innovation for us is not limited to new opportunities. We continue to invest heavily against what we know drives our brand and our core business, day in and day out: leadership in all things coffee, unparalleled customer service enabled by our world-class partners, innovative locally relevant store design, and digital platforms that extend and deepen customer loyalty and the customer experience.
Global coffee industry leadership remains at Starbucks’ core, and we are committed to elevating both our range of coffee offerings and the experiences we offer our customers, through the introduction of innovative new customized espresso beverages and cold coffee drinks.
We are also expanding our offerings of micro lot rare and exclusive reserve coffees. No other coffee industry participant approaches Starbucks’ ability to evaluate, select, blend, roast, and deliver micro lot coffees around the world, 20 so far in fiscal 2014 alone.
And in September, we’ll be offering an extraordinary micro lot reserve coffee, the first coffee developed on our own farm in Costa Rica. Expect to see an expanding and evolving portfolio of proprietary coffees under the Reserve brand from our coffee farm in Costa Rica and around the world in the future.
At the same time, we are aggressively pursuing new store segmentation opportunities in order to showcase Clover, pour-over, and other unique brewing methods.
As Starbucks continues to deliver record revenues and profits, it’s becoming increasingly clear to others what we have known all along, that Starbucks’ most valuable asset is our store partners, our people.
The culture of our company has been curated in our stores and is on display every day as partners connect with customers and one another. Recognizing the respect that Chinese children have for their parents, two years ago I hosted the first family meeting of its kind in China, a coming together of partners, parents, and families, at which we shared Starbucks’ values, heritage, and culture and an aspiration to improve the lives of youth and the communities in which they live. And last month, we held two more extraordinary family meetings of this type in Guangzhou and Beijing.
This year, we’ve brought the concept to the U.S., holding family meetings in New York City; Washington, DC; and Seattle, and introducing the Starbucks College Achievement Plan, the unique benefit we are providing to our U.S. partners.
Just as millions of partners and their families have benefited from healthcare and stock equity over the last few years, the Starbucks College Achievement Plan will benefit our people by helping them earn a college degree, unlocking doors to life-changing opportunities, dreams, and their own aspirations. Investments such as these promote increased trust and loyalty, strengthen our bond with our people, and help us support them both professionally and personally.
We also continue to seek opportunities to develop our next generation of leaders. I have no doubt that the global leadership conferences we’ve held in New Orleans in 2008 and Houston in 2012 directly contributed to the record results we reported in 2013 and now are seeding in 2014. I’m looking forward to hosting over 2,000 district managers in Seattle this October and our next global leadership conferences in Orlando, Florida, in October 2015.
We continue to elevate the equity of the Starbucks brand through the introduction of flagship, unique stores all over the world that deliver strong unit economics and cast a bright halo over all things Starbucks. In Q3 alone, we opened 344 stores, including a technology forward company owned store at Walt Disney World in Florida, our ninth Disney store as part of that partnership.
I’m highlighting the new Disney store because Disney stores are among the highest-volume stores in our portfolio and we are actively pursuing further opportunities to partner with Disney and open additional Disney stores around the world.
But relevance and innovation are not limited to our U.S. store portfolio. We recently opened two stunning flagship stores in China that I saw for myself just a couple of months ago, including in Beijing, where we opened our first 24-hour store to a tremendous customer response, giving us confidence that we can introduce additional 24-hour store formats elsewhere in the world.
And just last week, I had the opportunity to experience firsthand the romance and local influences unique to Colombia’s rich coffee heritage and see it come to life in our first opening in Colombia. The design of this iconic three-story, spectacular flagship store in Bogota was inspired by Starbucks’ unique 43-year relationship with Colombian coffee farmers dating back to our first store in the Pike Place Market in Seattle.
Honestly, it was simply one of the most extraordinary emotional celebratory openings I have ever witnessed. And customers will find the same level of imaginative design in Vietnam, where over the last few days we’ve opened our first two Starbucks stores in Hanoi, showcasing stunning local artwork and décor that speaks to Vietnam’s strong coffee legacy.
New stores in different countries on different continents, with different coffee cultures and no aided awareness to speak of, but the same results: lines out the door and customers clamoring to get in day after day, from morning until night. These openings remind me that despite the size of our current global store footprint, pent-up demand for the Starbucks experience continues to increase, and that we have untold markets yet to open and expand in the years ahead.
Digital platforms have been instrumental in building brand loyalty and extending and deepening customer engagement with the Starbucks brand. We have invested well ahead of the curve to create opportunities for our customers to engage with their social and digital networks on mobile devices and are now beginning to see the payoff of these investments.
While many national and international retailers are just beginning to appreciate the critical importance of integrating a mobile platform into their business, Starbucks continues to expand our leadership position by providing the digital services and content our customers truly value and appreciate. And we are committed to developing new digital products and services that are relevant to our customers, deepen our brand engagement, and leverage the network effect of a growing digital platform in the future.
Starbucks digital success starts with the popularity of our cards, and the loyalty program associated with those cards. The Starbucks card is now available to customers in 29 global markets. Our My Starbucks Rewards loyalty program now has over 8 million active members in the U.S. and continues to grow around the world.
In fact, in China today, MSR transactions now account for over 40% of total tender, a remarkable metric, and demonstrates the loyalty of our Chinese customers and the relationship they have to this card.
Stars, the loyalty program rewards currency, are highly motivating to consumers. We are seeing rapidly growing participation in the program and increasingly positive results through offering stars as rewards in highly targeted one-to-one marketing.
And we are seeing this not only in our stores - and this is really important - but in the grocery channel as well. The extension of MSR to include the integration of star codes on packaged coffee in the grocery channel is proving highly accretive, with nearly 1.3 million MSR members having earned and redeemed nearly 7 million stars to date, as we leverage multiple channels’ distribution.
The core strength of our loyalty program is fueling adoption of our mobile app. Customers continue to embrace our industry-leading mobile app in increasing numbers, and we now have almost 12 million active users of our mobile app in the U.S. and Canada alone. Mobile payment now accounts for over 15% of all transactions in our U.S. company operated stores and we are now processing on average 6 million mobile transactions in the U.S. every week alone.
By integrating mobile loyalty, payment, and in-store digital experiences, we are creating game-changing technologies and experiences for our customers, and the opportunity to introduce new lines of business for our company. A prime example of this is our forthcoming mobile order and pay initiative that will allow customers to use their phones and MSR accounts to order ahead of arriving at a store where we plan to pilot in a major U.S. market later this year.
Mobile order and pay will be the fastest and easiest way for customers to order, pay for, and pick up their purchases, once again demonstrating the lead position Starbucks has in all things mobile. Mobile ordering is just the first of many initiatives in the pipeline that will enable Starbucks to extend its lead position in mobile payments, while leveraging the value of Starbucks stars to tens of millions of loyal customers across the globe.
As Starbucks enters its Q4, we are well on our way to meeting our growth targets for fiscal 2014, and ideally positioned to continue delivering double digit top and bottom line growth into the future. I could not be more proud of our Starbucks partners or of the exceptional execution and extraordinary results we are delivering to our shareholders, but we strongly believe the best is yet to come.
I’ll now pass the call over to Troy and Scott to discuss our Q3 operating and financial performance in detail and share our initial fiscal 2015 targets.
Troy Alstead
Thanks, Howard, and good afternoon everyone. Our third quarter results are a testament to the growing strength and global relevancy of the Starbucks brand. Q3 performance was driven by continued beverage and food innovation, deepening our connection to customers and elevating our customer experience through phenomenal execution by our partners.
I’ll discuss our third quarter performance for each reporting segment and then turn the discussion over to Scott for additional details on our financial results, our outlook for the balance of fiscal ’14 and preliminary targets for fiscal 2015.
Each of our reportable segments set new third quarter records for revenue and operating income. Let me start with the Americas segment, which delivered another quarter of strong results, despite a persistently difficult retail environment.
Total net revenues in the Americas were $3.1 billion in Q3, up 10% over the prior year. The largest driver of this increase was strong comp growth of 6%, with 4% coming from ticket growth and 2% from transactions. These results are particularly significant given the 9% comp we were lapping from a year ago.
Comp growth for our U.S. business outpaced that of the Americas, accelerating to 7%. One of the primary drivers of this growth is the strong progress we’re making with food. The improved quality and variety of our food offerings once again drove 2 points of comp growth, and we expect that the ongoing innovations we’re planning will continue to drive comps in the coming years.
In addition to providing a meaningful contribution to our comp growth, our food program is also driving significant margin improvement. Working closely with our vendors, we’re benefitting from improved manufacturing costs. In our stores, our efforts to improve inventory management and waste are paying off.
A major contributor to our success in food is our breakfast sandwich platform, which delivered 40% growth in the third quarter. The bakery rollout of La Boulange in our U.S. stores is nearly complete, with remaining stores slating to be converted by mid to late August.
Throughout the rollout, we continue to make enhancements to the line and leverage operational learnings through all day parts as we go, including our lunch program. We’ve learned a great deal from the breakthrough launch and from our current lunch test, closely monitoring customer and partner response as we test new offerings.
These learnings have influenced our approach to enhancing our lunch program. Customer response to the two new sandwiches we introduced at the end of the third quarter has been very positive, leading to an uptick in sales and attach rates to our lunch offerings.
This recent success has encouraged us to introduce new SKUs to the lunch line going forward, and we’ll continue to evolve our lunch program with this disciplined, measured approach, which minimizes disruption to both store operations and customer routines.
It also allows us to test and adjust products as necessary. By the end of fiscal 2015, we expect the lunch program to look very different than it does today, and we will continue to evolve and enhance our lunch offerings in the years ahead.
In addition to food, beverage innovation was a strong contributor to our results, with a new limited time offering, Café Espresso Frappuccino to our growing refreshments platform including Teavana Iced and Shaken Teas and Refreshers, to Teavana Oprah Chai, which also
helped drive overall growth in our chai tea platform.
Our core Frappuccino beverages also performed well, demonstrating the healthy balance of new and longtime favorites driving customers’ purchases. And in addition, pricing contributed 1 point to comp growth in the quarter.
Howard already mentioned Fizzio. We are equally excited about innovation in the refreshment category with our super premium Teavana branded teas in our entire U.S. Canadian company operated store portfolio.
Our summer Teavana Shaken Iced Tea limited time offerings have been in stores since May, and have significantly up-leveled our tea offerings. Returning favorite Peach Green Tea Lemonade and a new Blackberry Mojito Tea Lemonade are delivering strong results, and we expect both to remain customer favorites throughout the summer.
These innovative beverage offerings, along with our new lunch sandwiches, are part of our bigger initiative to consistently grow across all day parts, including afternoons, which have shown the strongest comp growth over the last few quarters.
Drive-thrus remain a very important part of our U.S. store portfolio, as they continue to deliver very strong results. They account for more than 40% of our company operated stores and continue to show double digit total sales growth year over year for the third consecutive year.
This speaks to the convenience they provide for our customers throughout their daily travels. Our field teams remain focused on consistently enhancing our drive-thru customer experience, including investments in innovative design elements and functionality. As we broaden and expand our drive-thru program, we see another layer of opportunity for tremendous growth.
Now turning to EMEA, where the turnaround continues to progress. The region delivered strong 13% revenue growth in the third quarter, attributable to favorable foreign currency exchange, 3% comp growth, and incremental revenue from 161 net new stores opened in the last 12 months.
The 3% comp growth was the fifth consecutive quarter with positive comps, driven by a 2% lift in transactions and a 2% rise in average ticket. The two-year comp at 5% represents the highest two-year comp since the first quarter of 2012. Continued focus on solid in-store execution and a strong lineup of products, including continued progress in up-leveling our food program in Europe are all contributing to these strong results.
Also noteworthy to highlight, comps from two of our largest EMEA markets, the U.K. and Germany, where economic recovery is taking hold, outpaced the overall regional comp growth for the quarter. The outlook for the U.K. in particular continues to be positive, supported by declining unemployment and the expectation of a sixth consecutive quarter of positive GDP growth.
Our EMEA license markets are also performing exceptionally well. Turkey and the Middle East in particular continue to outperform, with even stronger comp growth relative to company operated stores. These results support our license-focused growth strategy for the region, where today 50% of our stores are licensed.
Turning to the China Asia Pacific region, where our growth aspirations continue to be reaffirmed by the robust performance of our new stores and the strong comp growth we continue to deliver in this region. CAP total net revenues grew 23% to $288 million in Q3, a new all-time record, and represents the 15th consecutive quarter with revenue growth in excess of 20%.
The largest driver of this growth was incremental revenue from new stores. A key driver of the strong comp growth is our ability to innovate and offer our customers beverage and food options that appeal to their unique tastes. We introduced several record breaking limited time offerings in the blended category that were received with great enthusiasm by customers.
In China and select Asian markets, the strawberry cheesecake Frappuccino set instant records for the top-selling limited time Frappuccino offering ever. Beverages and products that revolve around our coffee core also showed momentum, including VIA lattes and Reserve coffees in some of our key markets, and our Macchiato marketing campaign highlighted barista artistry and brought Starbucks espresso expertise to the forefront as a key differentiator.
CAP’s 7% comp growth for Q3 reflects a 6% increase in traffic, which is outstanding considering we were lapping an exceptionally high 8% traffic comp a year ago. There are a few metrics worth highlighting relative to our CAP performance in the third quarter.
Two year comps for the region are at a strong 16%. Once again, comps in China outpaced the region overall, despite concerns around an economic slowdown in China. And, the political instability in China has eased slightly, but continued to weigh at consumers in Q3. Traffic from this market has still not returned to the strong levels achieved in prior periods.
These results, and the investments we’ve made across the region give me great confidence about our future performance in the CAP segment. Into the third quarter, we’ve had 4,425 stores in this region, which included 543 net new stores opened during the past 9 months, keeping us on track to meet our target of 750 new stores in CAP for fiscal 2014.
Finally, new channel development, where our third quarter performance has reaffirmed our confidence about expanding customer occasions outside Starbucks retail stores. This segment achieved new records for revenues and operating income in the third quarter, which resulted in double digit revenue growth and strong margin expansion.
Revenues were $375 million, a 13% increase over the prior third quarter, primarily driven by increased sales of premium single serve products and increased sales volumes of packaged coffees.
We gained share during the quarter both in the premium single cup category and the premium packaged coffee space, underscoring our leadership position in premium at-home coffee. Looking ahead, we are very excited about the innovation we will be introducing across our coffee portfolio in Q4, with several new K-cup SKUs including flavored coffees, the addition of Fall Blend and single origin coffees in both K-cup and packaged coffee, as well as new VIA lattes.
Now, I’ll turn the call over to Scott to take you through financial results for the quarter, our outlook for the balance of fiscal 2014, and preliminary targets for fiscal 2015. Scott?
Scott Maw
Thanks, Troy, and good afternoon everyone. Our business has performed exceptionally well once again this year, and the third quarter continued that trend, thanks to fantastic execution and customer focus by our partners across the globe.
I’m particularly pleased with our consolidated comp store sales, which increased 6% and revenue growth of over 11%. Our consolidated operating income grew 25% to $769 million, a new third quarter record. This translates into 18.5% operating margin, an increase of 200 basis points over the prior year.
In terms of segment profitability, operating income in the Americas grew to $728 million, up 18% over the last third quarter. Operating margin expanded 150 basis points to 24%, primarily driven by strong sales leverage.
These are clearly fantastic results, and our 7% U.S. comp growth in particular takes on even greater significance given recent same-store sales trend data reported by many other retailers.
EMEA’s profitability continues to improve as we remain focused on the turnaround in that market. Operating income more than tripled to $29 million over the prior third quarter and operating margin expanded 580 basis points to 9%.
Sales leverage, combined with our intense cost focus throughout the P&L, were key drivers to the margin expansion. We are also very pleased with the performance in China Asia Pacific, which delivered strong operating income exceeding $100 million for the very first time.
This 19% increase over last year, which translated into a 35% operating margin, reflects particularly strong performance from China company owned stores and our JV partnerships in South Korea, Japan, and East China.
The ongoing portfolio shift towards more company operated stores and the impact of unfavorable foreign currency exchange from a weaker yen were partially offset by strong sales leverage, leading to a 120 basis point operating margin reduction.
Margin expansion for channel development continued in Q3. Revenue increased 13% and operating profit grew 45% to $139 million. Operating margin of 37% was an 800 basis point improvement over last year. The largest driver was favorable coffee costs, but underlying efficiencies such as improved inventory management practices also contributed.
The operating loss related to all other segments expanded in the third quarter to $19 million, reflecting continued investments in our emerging businesses. On a consolidated basis, our excellent global revenue growth and margin expansion drove up earnings per share 22% to $0.67, a new record.
Additionally, we returned nearly $500 million to shareholders during the quarter through dividends and share repurchases. On a year to date basis, cash returns to shareholders totaled $1. 82 billion based on our history for this period.
Finally, Q3 operating cash flow was $850 million, up 28% from last year, driven by strong business unit performance and ongoing working capital efficiencies.
And now I want to cover how we expect to finish fiscal 2014. To better understand and evaluate our future performance, I will be referencing certain non-GAAP financial measures.
Our excellent results across the company in the third quarter put us in a great position to deliver another year of strong growth. We’re now targeting fourth quarter non-GAAP EPS in the range of $0.73 to $0.75, which excludes an estimated net benefit of $0.03 related to the sale of our retail operations in Australia and Malaysia that may close in the fourth quarter.
This gives us growth of 22% to 25% over Q4 2013 calculated on a non-GAAP basis. It’s very important to note that our Q3 EPS growth rate was 22%, and we believe this same rate of significant growth or perhaps a slight increase will continue in Q4.
On a GAAP basis, whole year fiscal 2014 EPS will be in the range of $2.70 to $2.72. Non-GAAP EPS will be in the range of $2.65 to $2.67, which excludes the estimated net benefit of $0.03 related to the sale of the previously mentioned retail operations and the $0.02 benefit from a litigation credit recorded in our first quarter of this year.
This gives us a very strong 21% to 22% growth over fiscal 2013, calculated based on non-GAAP EPS. In terms of our other targets, we continue to expect revenue growth of 10% or better, driven by strong global comp store sales growth in the mid-single digits. We now expect to open 1,550 net new stores globally, with the 50 additional stores from our prior target coming from the Americas.
Consolidated operating margin for fiscal 2014 is now expected to be an approximately 200 basis point improvement over FY2013 when excluding the Kraft litigation charge in fiscal 2013, an excellent result, driven by strong sales leverage and commodity favorability.
We continue to expect moderate operating margin improvement year over year in the Americas. In EMEA, we remain on target for our operating margin reaching the high single-digits as evidenced by our strong performance so far this year.
In CAP, we continue to target operating margin moving towards the low 30% range, including year over year margin deceleration in Q4 given the ongoing ownership mix shift and lapping certain favorable nonrecurring items from last year.
And for channel development, given the strong year to date performance, we are increasing our operating margin expectation to approximately 600 basis points of margin expansion in fiscal 2014.
Looking ahead to 2015, we anticipate again delivering significant growth for our shareholders while investing in critical capabilities for our customers and partners. We are recommitting to our long term guidance for EPS growth of 15% to 20%.
Next year, we anticipate EPS growth within that same range on a non-GAAP basis. However, toward the lower end due to the following factors. First, the past two years have included significant commodity cost tailwinds. This includes 4 percentage points, or approximately $0.10 of this year’s EPS growth attributable to favorable commodity costs.
In contrast, next year we expect commodity costs to be roughly neutral, or have a minor unfavorable impact based on the roughly 60% of our coffee needs we now have price protected for fiscal 2015. Second, we continue evaluating opportunities to drive long term growth in our businesses, with a specific focus on enhancing the partner experience and digital related investments.
Other targets for fiscal 2015 include revenue growth of 10% or greater, global comparable store sales growth in the mid-single digits and 1,600 net new stores globally, with 650 in the Americas, 150 in EMEA, and 800 net new stores in China Asia Pacific.
These represent our initial growth targets for 2015. We’re still in the process of finalizing our annual operating plan, which is due to be wrapped up in September. We will then provide further details on our fiscal 2015 targets when we report Q4 and fiscal 2014 earnings in late October.
The results we delivered in Q3 are the product of a business model built on continuous innovation, on an intense customer focus, and on world-class execution. Over the years, we have consistently invested to support and growth that model, all while delivering significant shareholder value.
And while we have again set challenging targets for Q4 and beyond, we are confident in our trajectory for a number of reasons, including innovation as a core competency of ours. And as a result, we have multiple layers of significant diverse growth opportunities in the pipeline.
Our position as the global coffee authority is a major asset, and we continue to invest and focus on extending our capabilities in this area. Our industry leading store design and digital capabilities deliver outstanding results, with much more coming in the years ahead. And our focus on our people will only accelerate, with a clear correlation between enhancing the partner experience and delivering excellent results.
Finally, as we expand, invest, and innovate, we will maintain a sharp level of financial discipline, preserve a strong balance sheet, and generate increasing cash flow. This will result in powerful returns on capital and will continue to significantly benefit our shareholders.
With that, I’d like to turn the call back over to the operator for Q&A.
Earnings Call Part 2:
