Starbucks Corp (NASDAQ:SBUX) Earnings Model
Author: Bansari Patel & Devin Kusmider, Published: July 19, 2019 6:00pm Category: Earnings Preview (Fiscal 3Q2019)
Model Summary: SBUX’s key value drivers of this model include the revenue growth, same-store sales, economic profit, and the ratio of operating expenses as a percentage of revenue for each geographic region. SBUX promises to gain market share with successful new product introductions and maintain valuable historical growth. Key assumptions in this model include increased competition and growth opportunity in China in the future quarters from Luckin and other companies, an intensified economic downturn in Europe, and stronger results in the U.S. accelerated by the new product initiatives and recent changes to the customer loyalty program.
We projected moderate incremental improvements in the CAP segment, in line with past results from international expansion initiatives. China is a significant growth opportunity for SBUX. However, we did assume an increase in Opex as a percentage of sales, driven by increased headcount and other spending related to new project investments. In our model we are assuming that SBUX is inevitably going to reach the same position in America: steady decline leading to growth retreat. We are also modeling a slight decline in the EMEA segment revenue growth rate, with a slight contraction in operating margin in the first half of the fiscal year 2020.
We projected moderate incremental improvements in the CAP segment, in line with past results from international expansion initiatives. China is a significant growth opportunity for SBUX. However, we did assume an increase in Opex as a percentage of sales, driven by increased headcount and other spending related to new project investments. In our model we are assuming that SBUX is inevitably going to reach the same position in America: steady decline leading to growth retreat. We are also modeling a slight decline in the EMEA segment revenue growth rate, with a slight contraction in operating margin in the first half of the fiscal year 2020.
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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.