After Starbucks' (NASDAQ: SBUX) results for its important holiday quarter were posted yesterday, the stock sold off about 5% in after-hours trading. In eight telling metrics, here's a look at the quarter's results, including what likely sparked pessimism toward the stock price when the report was released.
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Image source: Starbucks.
Global comparable-store sales increased 3%. If there's any metric the company may have disappointed the most, it was likely global comparable-store sales, or sales at company-operated Starbucks locations open 13 months or longer. Analysts were expecting the coffee giant to report 4% same-store sales growth.
What caused the worse-than-expected same-store sales? In somewhat of a twist, the company says it was caused by the success of its mobile orders. Because of therapid adoption of mobile orders and mobile payments, long lines have shifted from the cash register to the pickup counter, Starbucks' operating chief Kevin Johnson explained during the company's earnings call on Thursday. This meant some customers would walk in, see the long line at the pickup counter, and leave, Johnson said.
But Johnson, who is slated to fill Schultz shoes when the founder steps down in a few months, said the company has some plans in place to fix the issue.
Starbucks expects 8% to 10% revenue growth in fiscal 2017. This forecast is another likely reason for the stock's post-earnings sell-off. In its new five-year plan in the wake of founder Howard Schultz's decision to step down from his CEO role and focus on the development of the company's premium Reserve Roasteries, the company said it expected to average 10% annualized revenue growth in the coming years. To this end, Starbucks' had previously forecasted double-digit revenue growth in fiscal 2017.
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Revenue increased to $5.73 billion. Beyond its worse-than-expected same-store sales growth and full-year revenue guidance, a final reason investors may be disappointed in Starbucks' results is that the company's $5.73 billion in first-quarter revenue was lower than expected. While revenue was up 6.7% year over year, it was about 2% lower than the consensus analyst estimate for the quarter, per analyst estimates compiled by Thomson Reuters.
Earnings per share increased 13% year over year. Combining Starbucks' growing revenue with a record first-quarter operating margin of 19.8%, up from 19.7% in the year-ago quarter, the company's adjusted earnings per share of $0.52 still met analyst expectations, despite Starbucks' worse-than-expected revenue growth. In its first-quarter earnings release, management said its higher profit margin was "primarily due to sales leverage and lower commodity costs, mainly coffee."
Mobile orders and payments accounted for 7% of U.S. transactions. Highlighting the company's strong growth in mobile orders and payments, this figure is up significantly from 3% in the year-ago quarter. While rapid mobile adoption worked against Starbucks in its first quarter, it represents a significant opportunity for the company as it addresses wait times at pickup counters. Historically, Starbucks' mobile customers have proved to be both higher spenders and more loyal.
Image source: The Motley Fool.
Starbucks opened 649 new stores in 75 countries. This brings the company's total store count to 25,734, up a nice 9.2% from the year-ago quarter.
Comparable-store sales in China were up 6%. China continues to be a bright spot for the company, with higher same-store sales growth than any other region. Revenue in the region is also growing faster than Starbucks' overall revenue; sales in the company's China/Asia Pacific segment increased 18% year over year.
While Starbucks' worse-than-expected global same-store sales, overall revenue, and full-year guidance raise concerns, management seems to think its mobile order and mobile payment problem can be reversed -- a move that would likely help revenue. Still, investors should keep an eye on these negative trends to see if they persist or worsen. Meanwhile, investors can take comfort in the more promising Asia/Pacific China segment, where Starbucks is firing on all cylinders.
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