Starbucks Financial Statements and Financial Ratios Analyzed from 2015 to 2019

"Starbucks 2019 Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA., doctoral candidate, and owner of Quality Business Plan.  In this summarized book, the author researched Starbucks 10k, Starbucks 2017 10k annual report, Starbucks 2016 10k annual report, Starbucks 2015 10k annual report, and Starbucks 2019 10k annual report as the basis for information gathering.  Once all Starbucks 10k annual statements were collected, the author then inserted Starbucks income statement information and Starbucks balance sheet information into a customized financial template. 

Starbucks Company Summary From 2015 to 2019

Starbucks Corporation would be classified as coffee bean roaster and coffee retailer, competing on a global scale.  In their stores, Starbucks offers customers coffee, tea, roasted whole coffee beans and grounded coffee, iced tea, pastries and other snacks.  On a final note, the company operated about 30,000 stores, they were founded in 1971 and their headquarters is located in Seattle, Washington.

Starbucks Leadership

The current executive team and compensation are as follows.

Executive Team
Executives Title Pay Amount
Kevin Johnson CEO 2.49 Million
Howard Schultz Founder 2.22 Million
Rosalind Brewer COO 2.42 Million
Clifford Burrows Pres. Retail 1.16 Million
John Culver Pres. International 1.49 Million

Starbucks’s Income Statement – Summary Analysis

In reviewing Starbucks’s last five years’ income statement, specific findings were identified.

Revenue Growth: Starbucks' revenues ended in 2015 at $19.1 billion.  In the next five years, the organization grew its revenues to 26.5 billion.  This is an average growth rate of approximately 8.5%.  However, the trend for the last couple of years seems to be a slowing of growth.  In 2018, the growth rate was 10%, where 2019 only had a 7.2% growth rate.  If this trend continues, this may indicate that the organization is either entering a mature phase of the business cycle or customers’ tastes are changing in the organization is not addressing this change adequately.

SG&A:  The company’s SG&A, as a percentage of sales, ended in 2015 at 6.2%.  However, in 2019, the percentage of sales for this line item grew to 6.9%.  This indicates that the company is spending more money on overhead and advertising to generate fewer sales.  An excellent practice to mitigate this problem would be to reduce overhead by streamlining headquarter operations.

Starbucks Income Statement 2019

Column1 2019 2018 2017 2016 2015
Revenues                    26,508                    24,720                    22,387                    21,316                      19,163
COGS                      8,527                    10,175                      9,034                      8,509                        7,788
Gross Profit                    17,981                    14,545                    13,353                    12,807                      11,375
SG&A                      1,824                      1,759                      1,451                      1,409                        1,197
Depreciation                      1,377                      1,247                      1,011                         981                           894
R & D                            -                         224                         154                            -                             -
Other                            -                            -                            -                            -                             -
Operating Expenses                    21,808                      7,733                      6,994                      6,564                        5,934
EBIT                      4,077                      3,883                      4,135                      4,172                        3,601
Other Income                            -                         191                         181                         103                             43
Interest Expense                         331                         170                           93                           81                             71
EBT                      4,466                      5,780                      4,318                      4,199                        3,903
Taxes                         872                      1,262                      1,433                      1,380                        1,144
Net Income                     3,599                     4,518                     2,885                     2,818                      2,757
Tax Rate 19.5% 21.8% 33.2% 32.9% 29.3%

Balance Sheet – Summary Analysis

Cash:  Except for 2018, Starbucks seems to be maintaining about a 10% cash holding as compared to sales.  If this strategy holds true, then this means that the firm has identified the optimal cash holding percentage to ensure adequate liquidity.  From this, deviation from the 10% benchmark could be an indicator of strategy change.  Another way of looking at this is that if the company changes strategies, then there may be external environmental variables for which the company may be contending.

 Accounts Receivable:  In the last five years, Starbucks has maintained an Accounts Receivable of approximately 3.5% of sales.  In the last two years, their accounts receivables have declined slightly as compared to sales.  This shows that the firm is either increasing their efficiency in collecting accounts receivables or they are tightening their credit policies for retailers.

Starbucks Summary Balance Sheet 2019

Column1 2019 2018 2017 2016 2015
Cash                        2,686                    8,756                    2,462                    2,129                    1,530
Short Term Investment                             71                       182                       229                       134                         81
Account Receivable                           879                       693                       870                       769                       719
Inventory                        1,529                    1,401                    1,364                    1,379                    1,306
Other                           488                    1,463                       358                       350                       334
Current Assets                       5,653                12,494                  5,283                  4,761                  3,971
Net PPE                        6,431                    5,929                    4,920                    4,534                    4,088
Goodwill                        3,490                    3,542                    1,539                    1,720                    1,575
Other                           781                       602                    1,024                    1,496                       665
Total Assets                    19,220                24,156                14,366                14,330                12,416
Accounts Payable                        1,189                    1,179                       783                       731                       684
Accrued Expense                           665                    2,298                    1,935                    1,999                    1,755
Accrued Taxes                        1,292                         -                         -                         -                         -
Notes Payable                              -                         -                         -                         -                         -
LT Debt - Current                              -                       350                         -                       400                         -
Other                              -                         -                         -                         -                         -
Total Current Liabilities                        6,169                    5,684                    4,221                    4,547                    3,648
LT Debt                      11,167                    9,090                    3,933                    3,202                    2,348
Other                        1,370                    1,431                       751                       690                       601
Total Liabilities                    25,451                22,981                  8,909                  8,439                  6,597
Common Stock                             41                         42                         43                         43                         43
Treasury                              -                         -                         -                         -                         -
Retained Earnings                      (5,771)                    1,457                    5,563                    5,950                    5,975
Other                         -                         -                         -                         -
Total Equity                     (6,232)                  1,176                  5,457                  5,891                  5,818
Total Equity & Liability                    19,220                24,156                14,366                14,330                12,416

Starbucks Financial Ratio Summary From 2015 to 2019

Current Ratio: Starbucks' current ratio ended in 2015 at 1.09.  Since this ratio is above 1.0, the company is considered to have adequate liquidity for the next 12 months.  However, in 2019, the current ratio fell to .92.  In the world of finance, falling below the 1.0 mark is an indicator of potential financial difficulties.

Total Asset Turnover:  Starbucks ended 2018 with a 1.02 total asset turnover.  This ratio is significantly lower than the 1.56 ratio in 2017.  This shows that the firm underutilized assets under their control.  However, in 2019, the total asset turnover increased to 1.38.  If the company maintains this trend, then this shows that management is continually optimizing the usage of assets available.  However, an inconsistent ratio may indicate that the company has no set strategy for the continued optimization of their assets.

Return on Assets:  Starbucks' return on assets ended 2015 at 22.2%.  In the subsequent five years, the return on assets has fallen continuously to 18.7%.  This shows that the firm is continually underutilizing assets under management control.  To mitigate this problem, the organization showed liquidate underutilize fixed assets.

Debt to Equity Ratio:  In the last five years, the Starbucks debt to equity ratio has grown from 40% to -180%.  This substantial increase in debt is partially attributed to the organization's strategic buyback of common stock.

Starbucks Liquidity Ratios 2019

Ratios 2019 2018 2017 2016 2015
Current Ratio                           0.92                    2.20                    1.25                    1.05                    1.09
Cash Ratio                           0.44                    1.54                    0.58                    0.47                    0.42
Quick Ratio                           0.67                    1.95                    0.93                    0.74                    0.73
Net Working Capital                         1,948                  7,372                  1,980                  1,546                  1,116

Starbucks Asset Utilization 2019

Ratios 2019 2018 2017 2016 2015
Total Asset Turnover                           1.38                    1.02                    1.56                    1.49                    1.54
Fixed Asset Turnover                           4.12                    4.17                    4.55                    4.70                    4.69
Days Sales Outstanding                         12.11                  10.23                  14.19                  13.16                  13.70
Inventory Turnover                         17.34                  17.65                  16.41                  15.46                  14.67
Accounts Receivable Turnover                         30.15                  35.67                  25.72                  27.73                  26.65
Working Capital Turnover                         13.61                    3.35                  11.31                  13.78                  17.17
AP Turnover                         22.29                  20.96                  28.61                  29.18                  28.01
Average Days Inventory                           0.05                    0.05                    0.04                    0.04                    0.04
Average Days Payable                           0.06                    0.06                    0.08                    0.08                    0.08

Starbucks Profitability Ratios 2019

Ratios 2019 2018 2017 2016 2015
Return on Assets 18.73% 18.70% 20.08% 19.66% 22.21%
Return on Equity -57.75% 384.27% 52.86% 47.83% 47.39%
Net Profit Margin 13.58% 18.28% 12.89% 13.22% 14.39%
Gross Profit Margin 67.83% 58.84% 59.64% 60.08% 59.36%
Operating Profit Margin 15.38% 15.71% 18.47% 19.57% 18.79%
Basic Earning Power 21.21% 16.07% 28.78% 29.11% 29.00%
ROCE 31.24% 21.02% 40.76% 42.65% 41.07%
Capital Employed                       13,051                18,472                10,145                  9,783                  8,768
ROIC 39.16% 22.82% 40.04% 46.07% 48.92%

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