FINANCIAL STATEMENT ANALYSIS:
STARBUCKS
Presentation By:
Frank Mai
Melanie Hampton
Aisha Saleemi
Zhongtao Xie,
Jiali Zhang
FOUNDATION:
Founded in 1971 in Seattle by:
Jerry Baldwin, Zev Siegel, and Gordon Bowker
Named after Captain Ahab’s first mate in the
classic novel Moby-Dick
Originally focused on selling dark-roasted coffee
beans to their customers
ENTER: HOWARD SCHULTZ
1981:
Vice president and GM of Hammarplast, got interested
in Starbucks
Convinced the Starbucks founders he could help
expand the business through his professional sales
and marketing skills
1985: Opened his own coffee bar chain called Il
Giornale after a trip to Italy
1987: Il Giornale purchased Starbucks
IMMEDIATE SUCCESS
The quality of the products and the efforts of
the employees
Fresh Arabica coffee beans and dark roasted
them in its own plants
Employee Benefits:
All of the employees received stock options though a
program called Bean Stock
First public company to provide full health benefits
to employees
FINANCIAL STATEMENTS
Accounting method: Conservative
High lights in 2008:
Net income: $316 million, decreased by $357 million
R&D: $7.2 million dollars
Total assets: increased by $329 million
Total liabilities: increased by $122 million
Stockholders’ equity: increased by $207 million
Schultz claim: Operating expenses allocated to materials,
employees, and managing the stores at 33% each
OFF BALANCE SHEET ITEM:
STORES
% of Total Revenue
Company-operated retail stores 84%
Specialty:
Licensing 12%
Foodservice and other 4%
COMPANY-OPERATED STORES
Sep 28, Sep 30, Net
2008 2007 Change
United States 7,238 6,793 445
International:
Canada 731 627 104
United Kingdom 664 580 84
China 178 141 37
Germany 131 104 27
Thailand 127 103 24
Singapore 57 45 12
Australia 23 87 (64)
Other 68 56 12
Total International 1,979 1,743 236
Total Company-operated 9,217 8,536 681
CASHFLOW STATEMENT
Sep-04 Sep-05 Sep-06 Sep-07 Sep-08
CFO 858.5 923.6 1131.6 1331.2 1258.7
CFI -696.9 -221.3 -841.0 -1202.0 -1086.6
CFF -66.5 -673.8 -155.3 -171.9 -184.5
TOTAL 98.2 28.8 138.8 -31.3 -11.5
RATIO ANALYSIS: LATEST 12 MONTHS DATA ITEMS
Activity Analysis Company Rank in Industry
Receivables Turnover 31.6
34
Inventory Turnover 16.0
12
Asset Turnover 1.9
64
Days CGS in Inventory 23
Liquidity Analysis
Current Ratio 0.9
Quick Ratio 0.4 62
58
Profitability Analysis
Gross Margin 54.9%
EBIT Margin 2.8%
34
59
Return on Assets 3.1%
61
ROE from Total
6.6% 59
Operations
COMPARISON: WITH INDUSTRY AND COMPETITORS
STARBUCKS MCDONALD’S NESTLE INDUSTRY
Revenue 10.38B 63.11B 109.91B 1.78B
Quarterly (5.5) (3.3) N/A (0.7)
Rev Growth
Gross 54.9% 36.73% 56.93% 31.93%
Margin
EBITDA 1.14B 7.51B N/A 183.13M
Operate 5.24% 26.79% N/A 7.37%
Margins
Net Income 171.70M 4.31B 18.03B N/A
EPS 0.232 3.764 4.87 0.55
STOCK OVERVIEW
QUOTES FOR STARBUCKS
STARBUCKS
AT THE FORBIDDEN CITY IN BEIJING
BOARDED UP STARBUCKS ON PICCADILLY
AFTER RIOTS
SOCIAL CRITICISMS
Foundation Concerns
Social Responsibility Tip-pooling
Environmental Awareness Unions
Workers’ Rights Fair-trade blunders
NEW CHALLENGES
2000 to 2005: Orin Smith as the President and CEO
2005: CEO Jim Donald. Store sales slowed
2008:
Company’s stock price cut in half on January 7, 2008
2008 recession: People can’t afford to pay $3.95 a day
for a café latte
Schultz believes company has lost its romance and soul
ACTION PLAN
Improving the current state of the U.S. business.
Slowing the company's pace of U.S. store openings
and closing a number of underperforming U.S. store
locations.
Re-igniting the emotional attachment with customers.
Re-aligning Starbucks organization.
SUGGESTION
Recession
New strategies:
Instant coffee,
Breakfast meals
Competition
McDonald’s McCafe