SEATTLE — The past year at Starbucks Corp. has been one of change and challenges as management has sharpened its focus to drive growth at scale, said Kevin R. Johnson, president and chief executive officer.
“Over the past year, our streamlined actions to simplify the business drove decisions to sell Tazo to Unilever, close the Teavana specialty retail stores, transition our e-commerce business to our channel partners and simplify our s.k.u. structure,” Mr. Johnson said during a Nov. 1 conference call to discuss full-year and fourth-quarter financial results. “More recently, we’ve taken steps to simplify work in our stores by automating inventory tracking and replenishment, which is enabling us to redirect more store partner time toward serving our customers. Business simplification is creating value through a more focused and more efficient operation.
“Finally, as we enter the next phase of our agenda driving growth at scale, we are transforming how our functional support organizations increase the velocity of innovation for our store partners. Innovation is relevant to our customers, inspiring to our partners and meaningful to the business. We view this as a multiyear initiative, with our primary focus on increasing the velocity of innovation that results in a more efficient operation as measured by G.&A. as a per cent of system sales.”
In the fiscal year ended Sept. 30, Starbucks net income was $4,518.3 million, equal to $3.24 per share on the common stock, up 57% from $2,884.7 million, or $1.97 per share, in the previous fiscal year. Total net revenues rose 10% to a record $24,719.5 million from $22,386.8 million.
Fourth-quarter net income slipped 4.1% to $755.8 million, or 56c per share, from $788.5 million, or 54c per share, in the prior-year period, while total net revenues grew 11% to $6,303.6 million from $5,698.3 million.
Global comparable store sales increased 3% in the fourth quarter and 2% for the year. Americas and U.S. comparable store sales increased 4% in the quarter and 2% in the year. Results in Americas were driven in part by beverage innovation, said Rosalind Gates Brewer, chief operating officer and group president of Americas.
“This quarter, strong beverage performance was driven by innovation in key platforms, which includes cold brew and refreshers,” Ms. Brewer said. “We also ramped installations of our successful nitro offering, adding nearly 700 stores in fourth quarter alone to reach 2,800 stores at year-end. This is a bullish sign for the future growth as these beverages, combined with our core espresso platform, represent our coffee-forward heritage more than other more indulgent categories. We are seeing customers adopt cold beverages across all dayparts and seasons, with sales growth after 2 p.m. improving for the quarter versus Q3.”
She added, “You’ll continue to hear us talk about beverage innovations because that’s where we see our greatest push from transaction growth.”
In the year ahead, Starbucks management expects to see benefits from the significant actions it has taken in the past 12 months, said Scott Harlan Maw, chief financial officer.
“We’re confident that the momentum we saw in Q4 and what we believe to be a very strong beverage, food and merchandise lineup for the upcoming holiday season will enable us to deliver a great start to the fiscal year,” Mr. Maw said. “For fiscal year 2019, we expect global comp growth near the lower end of our current 3% to 5% guidance range. We expect to add approximately 2,100 net new Starbucks stores globally in fiscal 2019, down slightly from the nearly 2,300 net new stores added in 2018 and to end fiscal 2019 with over 31,000 stores.
“China/Asia Pacific will drive approximately half of our global new store growth in fiscal 2019, adding 1,100 net new stores, including nearly 600 in China. We expect to add over 600 net new stores in the Americas, a 4% increase, with the U.S. at plus 3% net of the accelerated U.S. stores closures we discussed last quarter. And EMEA is targeting approximately 400 net new stores, virtually all licensed.
“We are expecting another strong year of revenue growth in 2019, with consolidated revenue increasing 5% to 7% in fiscal 2019, including approximately 2 points of headwind from streamline-related activities.”
The company also is expecting to benefit in the coming year from its newly forged partnership with Nestle S.A. to form the Global Coffee Alliance.
“As you may recall, we initially expected revenue and e.p.s. growth to both be impacted in 2019 by 2 to 3 points,” Mr. Maw said. “We now see the impact on revenue growth at the lower end of that range and e.p.s. growth impacted by 1 to 2 percentage points. We also stated that the deal would be accretive by 2021 as the domestic and international businesses gain momentum starting in the latter part of 2019. But ... we now see accretion in 2020.
“So, 2019 will come in ahead of our original guidance on the Nestle transaction on three key financial metrics: revenue; e.p.s.; and speed to accretion, further highlighting the strategic rationale and growth prospects of the Global Coffee Alliance.”
The day after results were announced, Starbucks shares in mid-morning trading on Nasdaq were up more than 9% from the Nov. 1 close of $58.63.