Starbucks Corp (NASDAQ:SBUX) Earnings Model
Author: Gaurav Saini Published: July 29, 2023
Shifts in Consumer Behavior
With the recent surge in products such as the iced shaken espresso platform and refreshers platforms, paired with their commitment to innovation by introducing options such as Pistachio Cream Cold Brew and the launch of oleato beverages, Starbucks' cold customized beverage strategy will continue to yield growth over the upcoming quarters. These new offerings give more reason for customers to be excited and come to Starbucks. Lines impacted/direction: North America Segment, increase revenue and decrease opex as a % of revenue. To reflect this opinion, I have increased my average revenue per store estimate by 1.6 percentage points each quarter in 2024 and 2 percentage points in 2025 to meet management’s guidance of 10-12% global revenue growth annually from fiscal 2023 to 2025.
With the recent surge in products such as the iced shaken espresso platform and refreshers platforms, paired with their commitment to innovation by introducing options such as Pistachio Cream Cold Brew and the launch of oleato beverages, Starbucks' cold customized beverage strategy will continue to yield growth over the upcoming quarters. These new offerings give more reason for customers to be excited and come to Starbucks. Lines impacted/direction: North America Segment, increase revenue and decrease opex as a % of revenue. To reflect this opinion, I have increased my average revenue per store estimate by 1.6 percentage points each quarter in 2024 and 2 percentage points in 2025 to meet management’s guidance of 10-12% global revenue growth annually from fiscal 2023 to 2025.
Tech and Efficiency
I expect the recent technological advancements aimed at improving in-store efficiencies including handheld cold foam blenders, the Siren System, and the Clover Verica brewers, to drive revenue growth in North America. The implementation of these technologies will further bring higher efficiencies, leading to reduced operational costs, resulting in greater operating margins. Lines impacted/direction: North America Segment, increase revenue and decrease opex as a % of revenue. To reflect this opinion, I have decreased each oper-ating expense line by 20 basis points and store operating expense by 40 basis points in F4Q2023 to meet management's guidance on Non-GAAP Operating Margin. Additionally, I decreased each operating expense line by ten basis points and store operating expense by 20 basis points in fiscal 2024.
I expect the recent technological advancements aimed at improving in-store efficiencies including handheld cold foam blenders, the Siren System, and the Clover Verica brewers, to drive revenue growth in North America. The implementation of these technologies will further bring higher efficiencies, leading to reduced operational costs, resulting in greater operating margins. Lines impacted/direction: North America Segment, increase revenue and decrease opex as a % of revenue. To reflect this opinion, I have decreased each oper-ating expense line by 20 basis points and store operating expense by 40 basis points in F4Q2023 to meet management's guidance on Non-GAAP Operating Margin. Additionally, I decreased each operating expense line by ten basis points and store operating expense by 20 basis points in fiscal 2024.
Strength of Rewards Program, Mobile Order & Pay
Starbucks Mobile Order & Pay segment achieved the highest record sales and mix of 24%. With 57% of US company-operated revenue coming from Starbucks reward members, demand for mobile ordering will con-tinue to grow, driving higher revenue and store efficiency. Lines impacted/direction: North America Seg-ment, increase revenue and decrease opex as a % of revenue. To reflect this opinion, I have decreased each operating expense line by 20 basis points and store operating expense by 40 basis points in F4Q2023 to meet management's guidance on Non-GAAP Operating Margin. Additionally, I decreased each operating expense line by ten basis points and store operating expense by 20 basis points in fiscal 2024.
Starbucks Mobile Order & Pay segment achieved the highest record sales and mix of 24%. With 57% of US company-operated revenue coming from Starbucks reward members, demand for mobile ordering will con-tinue to grow, driving higher revenue and store efficiency. Lines impacted/direction: North America Seg-ment, increase revenue and decrease opex as a % of revenue. To reflect this opinion, I have decreased each operating expense line by 20 basis points and store operating expense by 40 basis points in F4Q2023 to meet management's guidance on Non-GAAP Operating Margin. Additionally, I decreased each operating expense line by ten basis points and store operating expense by 20 basis points in fiscal 2024.
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Disclosure: The author of this article/model has no financial investment or other conflict of interest related to the subject company or other companies discussed. Any views made or implied in the content represent the author’s opinions.