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.
Table of Contents
- Page Count: 90 pages
- Disclaimer
- Acknowledgments
- Forward
- About the Author
- Company Summary
- Financial Statement Introduction
- Income Statement
- Starbucks’s Income Statement – Summary Analysis
- Income Statement Discussion
- Balance Sheet
- Balance Sheet – Summary Analysis
- Balance Sheet Discussion
- Financial Ratios
- Liquidity Ratios
- Liquidity Ratios – Summary Analysis
- Liquidity Ratios Discussion
- Current Ratio
- Quick Ratio
- Cash Ratio
- Other Liquidity Ratios
- Net Operating Working Capital
- Asset Ratios
- Asset Utilization Ratios – Summary Analysis
- Asset Utilization Ratios Discussion
- Total Asset Turnover
- Fixed Asset Turnover
- Days Sales Outstanding
- Inventory Turnover
- Accounts Receivable Turnover
- Accounts Payable Turnover
- Other Asset Ratio Calculations
- Working Capital Turnover
- Average Days in Inventory
- Average Days Payable
- Profitability Ratios
- Profitability Ratios – Summary Analysis
- Profitability Ratios Discussion
- Return on Assets (ROA)
- Return on Assets (ROA)
- Return on Equity (ROE)
- Profit Margin
- Gross Profit Margin
- Operating Profit Margin
- Basic Earnings Power
- ROCE
- Capital Employed
- Debt Ratios
- Starbucks’s Debt Ratios – Summary Analysis
- Debt Ratios Discussion
- Long-Term Debt Ratio
- Debt to Equity Ratio
- Times Interest Earned
- WACC
- Book Value of WACC
- Free Cash Flow (FCF)
- Free Cash Flows – 2015 – 2019
- Free Cash Flows – 5 Year Projections
- Income Statement – Projections for 5 years
- Income Statement – 5 Year Projections
- Balance Sheet – Projections for 5 years
- Balance Sheet – 5 Year Projections
- Company Valuation and Intrinsic Stock Price
- Appendix 1: Summarized Income Statement
- Appendix 2: Income Statement – Percent of Sales
- Appendix 3: Income Statement – Year over Year Growth
- Appendix 4: Summarized Balance Sheet
- Appendix 5: Balance Sheet as Percent of Total Assets
- Appendix 6: Summarized Financial Ratios
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 |
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% |
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 | |||
| Cash Ratio | 0.44 | 1.54 | |||
| Quick Ratio | 0.67 | 1.95 | |||
| Net Working Capital | 1,948 | 7,372 | |||
Starbucks Asset Utilization 2019 |
|||||
| Ratios | 2019 | 2018 | 2017 | 2016 | 2015 |
| Total Asset Turnover | 1.38 | 1.02 | |||
| Fixed Asset Turnover | 4.12 | 4.17 | |||
| Days Sales Outstanding | 12.11 | 10.23 | |||
| Inventory Turnover | 17.34 | 17.65 | |||
| Accounts Receivable Turnover | 30.15 | 35.67 | |||
| Working Capital Turnover | 13.61 | 3.35 | |||
| AP Turnover | 22.29 | 20.96 | |||
| Average Days Inventory | 0.05 | 0.05 | |||
| Average Days Payable | 0.06 | 0.06 | |||
Starbucks Profitability Ratios 2019 |
|||||
| Ratios | 2019 | 2018 | 2017 | 2016 | 2015 |
| Return on Assets | 18.73% | 18.70% | |||
| Return on Equity | -57.75% | 384.27% | |||
| Net Profit Margin | 13.58% | 18.28% | |||
| Gross Profit Margin | 67.83% | 58.84% | |||
| Operating Profit Margin | 15.38% | 15.71% | |||
| Basic Earning Power | 21.21% | 16.07% | |||
| ROCE | 31.24% | 21.02% | |||
| Capital Employed | 13,051 | 18,472 | |||
| ROIC | 39.16% | 22.82% | |||