Starbucks (SBUX) Up On Q2 Earnings Beat, Raised EPS View

Starbucks Corporation SBUX reported mixed results for the second quarter of fiscal 2019, wherein earnings surpassed the Zacks Consensus Estimate but revenues lagged the same.

Quarterly results benefited from robust performance by the Americas and China-Asia-Pacific segments, and store openings. Ownership change in the East China business and robust performance during the holiday season too aided the company’s quarterly performance. Meanwhile, comparable sales from China increased for the third straight quarter.

The company’s remarkable results and bullish earnings outlook for fiscal 2019 impressed investors as shares gained 1.1% in after-hours trading on April 25.

Earning, Revenue& Comp Discussion

Adjusted earnings of 60 cents per share surpassed the Zacks Consensus Estimate of 56 cents and grew 13% on a year-over-year basis.

Total revenues were $6.3 billion, which slightly lagged the consensus estimate but increased 5% from the year-ago level. The upside was driven by robust new store performance, comparable sales growth, consolidation of the company’s East China business and streamline-driven activities.

Global comparable store sales increased 3%, whereas it improved 4% in the first quarter of fiscal 2019. Global comps were driven by a 3% increase in average ticket.

In the quarter under review, Starbucks opened 319 net new stores worldwide, bringing the total store count to 30,184. Global store growth came in at 7%, based on a year-over-year comparison. The company stated that 94% of net new store openings were outside the United States while 88% were licensed.

Starbucks Corporation Price, Consensus and EPS Surprise

Starbucks Corporation Price, Consensus and EPS Surprise | Starbucks Corporation Quote

Overall Margin Contraction Continues

On a non-GAAP basis, operating margin contracted 40 basis points (bps) year over year to 15.8%. The contraction was largely due to the company’s licensing of the Channel Development business. Streamline activities also had an unfavorable impact of 80 bps on consolidated margins. Excluding the negative impacts, non-GAAP operating margin expanded by approximately 40 bps, owing to the company’s cost-saving initiatives, sales leverage and new revenue recognition accounting, partially offset by partnership investments, technological enhancement and retail.

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