Starbucks Q1 profit dips 66% but beats estimates

Starbucks (SBUX) reported a 66.2% dip in earnings for the first quarter due to higher operating expenses as well as Streamline-driven activities and partner investments. The results exceeded analysts’ expectations. The coffee giant raised its 2019 adjusted earnings outlook. Following this, the stock inched up 3.10% in the after-hours.

Net income plunged 66.2% to $760.6 million and earnings dropped 61.1% to $0.61 per share. Non-GAAP earnings increased 15.4% to $0.75 per share.

Net revenue grew 9.2% to $6.6 billion. The results included a net benefit of about 1% from Streamline-driven activities and unfavorable foreign currency translation of nearly 1%. Global comparable store sales rose 4% driven by a 3% increase in average ticket.

Looking ahead into fiscal 2019, the company still expects to add about 2,100 net new Starbucks stores globally. The revenue growth outlook is reiterated in the range of 5% to 7%. Earnings are still anticipated to be $2.32 to $2.37 per share range.

However, the company lifted its non-GAAP EPS outlook to the range of $2.68 to $2.73 per share from the prior range of $2.61 to $2.66 per share. Starbucks narrowed its global comparable store sales growth estimate to the range of 3% to 4% from the prior range of 3% to 5%.

In the first quarter, the company opened 541 net new stores, yielding 29,865 stores at the end of the quarter, a 7% increase over the prior year. Over two-thirds of the net new store openings were outside the US with about 50% were licensed.

Revenue for the Americas segment grew 8% year-over-year, primarily driven by a 5% store growth and 4% increase in comparable store sales. Net revenues for the China/Asia Pacific segment soared 45% primarily driven by the ownership change in East China at the end of Q1-2018, a 13% store growth, and a 3% increase in comparable store sales.

Unfavorable foreign currency translation hurt net revenue for the EMEA segment, which declined by 1%. Revenue for the Channel Development segment decreased by 20% primarily due to licensing its CPG and foodservice businesses to Nestle following the close of the deal on August 26, 2018, and sale of the Tazo brand.

Starbucks’ board of directors declared a cash dividend of $0.36 per share, payable on February 22, 2019, to shareholders of record as of February 7, 2019. In the first quarter of fiscal 2019, the company repurchased 72 million shares of common stock and about 96.8 million shares remain available for purchase under current authorizations.

Shares of Starbucks ended Thursday’s regular session down 2.54% at $64.74 on the Nasdaq. The stock has risen over 6% in the past year and over 11% in the past three months.

 

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