The Procrastinator's Guide to Financial Modeling
How to Build an SBUX Model - Template Download Page
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Updates From the Fiscal Fourth Quarter 2022 Release
On November 3, 2022 Starbucks reported their fiscal fourth quarter 2022 earnings results. The model below has been updated to include the latest results, with an explanation of the changes, and the earnings call transcript annotated with notes of some key points.
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Updates From the Fiscal First Quarter 2023 Release
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Updates From the Fiscal Second Quarter 2023 Release
Please note that this will be the last update posted. The general idea behind posting these updates was to give readers an idea of how to maintain the model as new information is released. The past three quarters have driven home this point.
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Questions From Readers
Question 1: Hi John, Hope you can give some hints in the book how to troubleshoot when the financial report breakdowns differ from that of the SEC 10-Q or 10-K filings. For example, below, I am stuck and could not figure out why the values differ (although the sum matches), and where did you get the SBUX filing files to enter as modelled in file-2.
SBUX Dec-30 2018 filing of Income statement (truncated)
SBUX Dec-30 2018 filing of Income statement (truncated)
From file-2 of the book:
As you can see it is not just the term change "Product and distribution costs" replaced "Cost of sales", but the value discrepancies of the itemized breakdown made me scratch my head (and gave up, hence this email).
Answer 1: Excellent question! "Never give up, never surrender!" Haha. So, what you are looking at is a perfect example of what I describe as the "imperfect data in a real-world scenario". Real-world examples are messy unlike textbook examples. This is what you will face in your career, and so this is why using real-world examples is best, so you can learn these lessons now.
Take a read of page 5 of the book and note this passage: " Be sure to work your way backward in time because the company may have made corrections after a previous release.... Companies report on a comparable basis, meaning two year-over-year data points are disclosed at a time."
It seems you may have been working forward in time instead of using the method of working backward and picking up two periods at a time. In fiscal year 2019 Starbucks reclassified their prior period expenses which is the reason you are seeing the discrepancy. As disclosed in the Fiscal 2019 10-K: "Further, to better support the review of our results, we have changed the classification of certain costs. The most significant change was the reclassification of company-owned store occupancy costs from cost of sales to store operating expenses."
If you had worked backward in time from the fiscal 2019 report, you would have gotten the reclassified numbers as shown below
Take a read of page 5 of the book and note this passage: " Be sure to work your way backward in time because the company may have made corrections after a previous release.... Companies report on a comparable basis, meaning two year-over-year data points are disclosed at a time."
It seems you may have been working forward in time instead of using the method of working backward and picking up two periods at a time. In fiscal year 2019 Starbucks reclassified their prior period expenses which is the reason you are seeing the discrepancy. As disclosed in the Fiscal 2019 10-K: "Further, to better support the review of our results, we have changed the classification of certain costs. The most significant change was the reclassification of company-owned store occupancy costs from cost of sales to store operating expenses."
If you had worked backward in time from the fiscal 2019 report, you would have gotten the reclassified numbers as shown below
In addition to this, in the fiscal third quarter of 2020 management changed the description of the account as disclosed in the press release "'The caption "Product and distribution costs" replaced "Cost of sales" in financial statements published in periods prior to our third quarter of fiscal 2020. Besides the name change, there were no other changes in the types of costs reported within the caption."
Ah the joy of financial reporting!
Ah the joy of financial reporting!