Coffeehouse chain Starbucks (NASDAQ:SBUX) beat analysts' expectations in Q4 FY2023, with revenue up 11.4% year on year to $9.37 billion. Turning to EPS, Starbucks made a non-GAAP profit of $1.06 per share, improving from its profit of $0.81 per share in the same quarter last year.
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Starbucks (SBUX) Q4 FY2023 Highlights:
- Revenue: $9.37 billion vs analyst estimates of $9.28 billion (1% beat)
- EPS (non-GAAP): $1.06 vs analyst estimates of $0.97 (9.06% beat)
- Gross Margin (GAAP): 29%, up from 25.8% in the same quarter last year
- Same-Store Sales were up 8% year on year (beat vs. expectations of up 6.5% year on year)
- Store Locations: 38,038 at quarter end, increasing by 2,327 over the last 12 months
“We finished our fourth quarter and full fiscal year strong, delivering on the higher end of our full-year guidance. Our Reinvention is moving ahead of schedule, fueling revenue growth, efficiency and margin expansion,” commented Laxman Narasimhan, chief executive officer.
Started by three friends in Seattle’s historic Pike Place Market, Starbucks (NASDAQ:SBUX) is a globally-renowned coffeehouse chain that offers a wide selection of high-quality coffee, beverages, and food items.
Traditional Fast Food
Traditional fast-food restaurants are renowned for their speed and convenience, boasting menus filled with familiar and budget-friendly items. Their reputations for on-the-go consumption make them favored destinations for individuals and families needing a quick meal. This class of restaurants, however, is fighting the perception that their meals are unhealthy and made with inferior ingredients, a battle that's especially relevant today given the consumers increasing focus on health and wellness.
Sales Growth
Starbucks is one of the most widely recognized restaurant chains in the world and benefits from brand equity, giving it customer loyalty and more influence over purchasing decisions.
As you can see below, the company's annualized revenue growth rate of 7.93% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was decent as it opened new restaurants and grew sales at existing, established dining locations.
This quarter, Starbucks reported robust year-on-year revenue growth of 11.4% and its $9.37 billion of revenue exceeded analysts' estimates by 1%. Looking ahead, the analysts covering the company expect sales to grow 10.4% over the next 12 months.
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Number of Stores
A restaurant chain's total number of dining locations often determines how much revenue it can generate.
When a chain like Starbucks is opening new restaurants, it usually means it's investing for growth because there's healthy demand for its meals and there are markets where the concept has few or no locations. Starbucks's restaurant count increased by 2,327, or 6.52%, over the last 12 months to 38,038 locations in the most recently reported quarter.
Taking a step back, Starbucks has rapidly opened new restaurants over the last eight quarters, averaging 5.5% annual increases in new locations. This growth is much higher than other restaurant businesses. Analyzing a restaurant's location growth is important because expansion means Starbucks has more opportunities to feed customers and generate sales.
Same-Store Sales
A company's same-store sales growth shows the year-on-year change in sales for its restaurants that have been open for at least a year, give or take. This is a key performance indicator because it measures organic growth and demand.
Starbucks's demand within its existing restaurants has generally risen over the last two years but lagged behind the broader sector. On average, the company's same-store sales have grown by 8% year on year. With positive same-store sales growth amid an increasing number of restaurants, Starbucks is reaching more diners and growing sales.
In the latest quarter, Starbucks's same-store sales rose 8% year on year. This growth was an acceleration from the 7% year-on-year increase it posted 12 months ago, which is always an encouraging sign.
Key Takeaways from Starbucks's Q4 Results
Sporting a market capitalization of $105 billion, more than $3.95 billion in cash on hand, and positive free cash flow over the last 12 months, we believe that Starbucks is attractively positioned to invest in growth.
It was good to see Starbucks beat analysts' revenue expectations this quarter based on higher-than-expected same store sales. We were also happy its EPS narrowly outperformed Wall Street's estimates given some of the mixed sentiment around the stock and uncertainty with regards to consumer spending lately. Overall, this was a fine quarter for Starbucks, and the company will give guidance on its upcoming earnings call, which will likely further impact the stock. The stock is up 7.28% after reporting and currently trades at $97.98 per share.
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The author has no position in any of the stocks mentioned in this report.