Starbucks Financial Analysis

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Campbellsville University *

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50638

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Finance

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Feb 20, 2024

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docx

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A REPORT ON ANALYSIS OF FINANCIAL STATEMENT OF STARBUCKS FOR THE FINANCIAL YEAR 2022-2021 INTRODUCTION: FINANCIAL STATEMENT ANALYSIS: The main purpose of FSA is to ascertain the profitability and financial soundness of a business. The FSA helps to understand the relationship between various financial components and helps owners of the business to identify the trends in different financial aspects. For the purpose of study STARBUCKS annual reports were considered for the detailed analysis of the financial statements. COMPANY INTRODUCTION: Founders: Started in 1971 by Jerry Baldwin, Zev Siegel and Gordon Bowker at Seattle’s Pike Place market. CEO: Laxman Narsimhan Head Quarters: Seattle, Washington, United States No of Locations: 38038 (2023) No of Employees: 402000 (2022)
STORES UPDATE: Stores update North America International Total percentage Company operated stores 10216 8037 18253 51% Licensed stores 7079 10379 17458 49% Total 17295 18416 35711 100% ITEMS WISE SALES MIX ITEMS 2022 2021 2020 BEVERAGES 74 74 75 FOOD 22 21 20 OTHERS 4 5 5 TOTAL 100 100 100 INTERPRETATION: From the above table it is understood that from past two years the investment in Beverages has reduced by 1%. Simultaneously increased investment in Food products by 1 %. The investment in other products like coffee and other ready to drink beverages reduced by 1%.
FINANCIAL ANALYSIS INTERPRETATION: From the above table it is understood that Net revenues of the company oriented stores increased by 8.0% and Licensed stores increased by 36.2% and others by 14.1% compare to previous year 2021. This will generate an overall increase of 11% in Net Revenues. INTERPRETATION: Product and distribution costs increased by 1% because of high supply and distribution cost Store operating expenses increased by 1% due to investment in labor cost due to training to new labor. Other operating expenses increased due to change in transaction cost Depreciation and amortization expenses as a percentage of total net revenues decreased due to sales leverage. Restructuring and impairment expenses due to lower costs incurred related to Reinvention Plan in the current year compared to prior years Income from equity investees decreased primarily due to the conversion of Korea market from a joint venture to a fully licensed market
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The combination of these changes resulted in an overall decrease in operating margin compared to fiscal 2021 INTERPRETATION TOTAL NET REVENUES North America Total net revenue increased by 14% due to increase in sales due to increase in overall ticket, increase in transaction and increase in performance of stores. The main reason is business recovery from covid 19 OPERATING INCOME North America operating income for fiscal 2022 increased 5% to $4.5 billion, compared to $4.3 billion in fiscal 2021.though operating Margin decreased by 19.2% because of heavy training and labor charges.
INTERPRETATION: INTERNATIONAL REVENUES: Total Net revenues increased by 19% due to high product sales and royalty revenues from licenses. The company has been continuously recovering from the COVID19coma Operating Income : International operating income for fiscal 2022 decreased 33 due to sales deleverage related to COVID-19 pandemic impacts in our China market ,investments and growth in retail store partner wages and benefits and lower temporary government subsidies , higher commodity and supply chain costs due to inflationary pressures and strategic initiatives . These decreases were partially offset by sales leverage across markets outside of China. INTERPRETATION: Revenues Channel Development total net revenues for fiscal 2022 increased 16%, compared to fiscal 2021, primarily due to higher Global Coffee Alliance product sales and royalty revenue and growth in
ready-to-drink business. These increases were partially offset by the impact of the extra week in fiscal 2021 Channel Development operating income for fiscal 2022 increased 4% compared to fiscal 2021. Primarily due to a decline in our North American Coffee Partnership joint venture income due to inflationary pressures and supply chain constraints. INTERPRETATION Unallocated corporate expenses include corporate administrative functions that support the operating segments but are not specifically attributable to or managed by any segment and are not included in the reported financial results of the operating segments. Corporate and Other operating loss increased to 7%. Due to increased support costs to address labor market conditions and increased partner wages and benefits. These increases were partially offset by lower performance-based compensation. OVER ALL FINANCIAL HIGHLIGHTS Total net revenues increased 11% to $32.3 billion in fiscal 2022 compared to $29.1 billion in fiscal 2021, inclusive of $576 million attributable to the extra week in fiscal 2021. • Consolidated operating income decreased to $4.6 billion in fiscal 2022 compared to $4.9 billion in fiscal 2021. Fiscal 2022 operating margin was 14.3% compared to 16.8% in fiscal 2021. Operating margin contraction of 250 basis points was primarily due to investments and growth in labor, including enhanced retail store partner wages (approximately 290 basis points) as well as increased spend on new partner training and support costs (approximately 80 basis points). Also contributing were inflationary pressures on commodities and our supply chain (approximately 270 basis points), sales deleverage related to COVID-19 pandemic related impacts in our China market (approximately 110 basis points), business mix shift (approximately 60 basis points) and lower government subsidies (approximately 60 basis points). These increases were partially offset by sales leverage across markets outside of China (approximately 390 basis points) and strategic pricing, primarily in North America (approximately 320 basis points).
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• Diluted earnings per share (“EPS”) for fiscal 2022 decreased to $2.83, compared to EPS of $3.54 in fiscal 2021. The decrease was primarily driven by lapping the prior year $0.56 gain, net of estimated taxes, on the divestiture of our South Korea joint venture and $0.10 related to the extra week in fiscal 2021. Also contributing were investments in labor and inflationary pressures on commodities and our supply chain, partially offset by growth in comparable store sales and lower restructuring costs. • Capital expenditures were $1.8 billion in fiscal 2022 and $1.5 billion in fiscal 2021. • We returned $6.3 billion to our shareholders in fiscal 2022 through share repurchases and dividends. We returned $2.1 billion in fiscal 2021 through dividends. In April 2022, we announced a temporary suspension of our share repurchase program to allow us to augment investments in our stores and partners. We resumed our share repurchase program in the first quarter of fiscal 2023