Starbucks Falls as 1st-Quarter Earnings Continue to Disappoint
- By Margaret Moran
After the markets closed on Jan. 26, Starbucks Corp. (NASDAQ:SBUX) reported earnings results for its first quarter of fiscal 2021, which ended on Dec. 27, 2020.
Although the coffeehouse chain beat Wall Street's forecasts on the earnings front, it missed on the revenue front, and business levels remained depressed compared to a year ago. Shares were down approximately 1.6% in after-hours trading following the news.
Earnings results
For the quarter, Starbucks posted GAAP earnings per share of 53 cents (down 28% year over year) and adjusted earnings of 61 cents per share (down 22%) compared to the 55 cents that Wall Street had expected. Revenue came in at $6.74 billion, a 4.9% decrease from the prior-year quarter, which fell short of the $6.94 billion that analysts called for.
President and CEO Kevin Johnson had the following to say about the results:
"I am very pleased with our start to fiscal 2021, with meaningful, sequential improvements in quarterly financial results despite ongoing business disruption from the pandemic. Investments in our partners, beverage innovation and digital customer relationships continued to fuel our recovery and position Starbucks for long-term, sustainable growth."
Due to its status as a social gathering place and coffee culture hub, Starbucks has struggled with lack of demand more than some other food and beverage companies during the pandemic, but this has been somewhat mitigated by its loyal customer base, online sales and loyalty program. For example, the 90-day active rewards member count in the U.S. increased to 21.8 million, up 15% year over year.
Operating income gained 3% to $180.8 million, up from $175.5 million in the first quarter of fiscal 2020, with the operating margin expanding 1,320 basis points to 48.7%.
Overall, global comps were down 5%, driven by a 19% decrease in comparable transactions but offset by a 17% increase in average ticket size. Comps were down 6% in the Americas and 3% internationally, with the notable exception of China, where comparable store sales were up 5%.
Starbucks opened 278 net new stores in the quarter, resulting in 4% year-over-year unit growth and ending the period with 32,938 stores in total.
The company ended the quarter with $14.67 billion in long-term debt, roughly flat compared to $14.65 at the same time last year. Meanwhile, cash and cash equivalents stood at $5.02 billion compared to $3.04 billion this time a year ago.
Looking forward
The company reaffirmed its outlook to achieve full business recovery by the end of fiscal 2021. "We remain optimistic about our robust operating outlook for fiscal 2021 as well as our ability to unlock the full potential of Starbucks to create value for our stakeholders," Johnson said.
For the second quarter, the company guides for comparable store sales growth of approximately 5% to 10%, with China comps anticipated to reach nearly 100%. GAAP earings per share is expected to fall in the range of 36 cents to 41 cents, with non-GAAP earnings somewhere between 45 cents and 50 cents.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Investors should always conduct their own careful research and/or consult registered investment advisors before taking action in the stock market.
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This article first appeared on GuruFocus.
