Scott Maw
chief financial officer
Strong financial performance
CONSOLIDATED OPERATING INCOME* 22% CAGR OVER THE PAST 4 YEARS:
$ MILLIONS
Cash Dividend Operating
$3,063
$1,997
$2,459 returns payout Cash flows
$1,698
FY11 FY12 FY13 FY14
~ 2X 2X 2X
EARNINGS PER SHARE* 21% CAGR
$2.66
$2.19
$1.52 $1.79
FY11 FY12 FY13 FY14
*FY14, FY13 and FY11 operating results are non-GAAP measures. Operating results growth rates are based on non-GAAP operating results. A reconciliation of GAAP to non-GAAP measures can be found at the end of this presentation.
Operating cash flow growth is based on non-GAAP operating cash flows: FY14 GAAP operating cash flows of $608 million have been adjusted to exclude the $2.8 billion cash payment in FY14 related to the Kraft arbitration matter.
Strong financial discipline
Driving incremental opportunities to fuel investment
Gross margin $1B savings from COGS over 4 years
G&A and support costs Grow < ½ revenue growth in 2015*
Working capital and ROIC ROIC + 50-100 bps/year
While maintaining core focus
• Best in class revenue growth
• Capital investment efficiency
• Total return to shareholders
*FY15 growth guidance excludes future costs related to leadership conferences and donations made to the Starbucks Foundation, as well as incremental revenues,
future transaction and integration costs, and support costs related to the acquisition of Starbucks Japan.
ROIC defined as NOPAT/Invested Capital. NOPAT adjusted for implied lease interest expense; average invested capital includes present value of minimum lease
obligations and excludes cash, cash equivalents and short-term investments.
Accelerating margin expansion
CONSOLIDATED OPERATING MARGIN*
410 BASIS
POINTS
18.6%
16.5%
14.5% 15.0%
FY11 FY12 FY13 FY14
*FY14, FY13 and FY11 operating results are non-GAAP measures. Operating results growth rates are based on non-GAAP operating results. A reconciliation of GAAP to non-GAAP measures can be found at the end of this presentation.
Leveraging cost of goods sold
COGS AS % REVENUE
13% COGS CAGR
12% REVENUE CAGR
~100 bps
FY11 FY12 FY13 FY14 FY15
Multiple levers for COGS savings over the next 4 years
$ MILLIONS
$
+ 1B
$100
$150-200
$75-125
$250-300
$250-300
Supply ChainCHAIN
SUPPLY operations Next Gen Sourcing
SOURCING WasteWASTE
Opportunity SKU Optimization
PRODUCT MIX All Other
OTHER
Today G&A growth closely tracks revenue growth
G&A GROWTH YEAR ON YEAR*
11% G&A CAGR
12% REVENUE CAGR
REDUCE G&A
AND SUPPORT
COST RUN
RATE BY
$100M
<½ OF
REVENUE
GROWTH
FY11-12 FY12-13 FY13-14 FY15
*FY11, FY12 and FY13 G&A expenses ($749.3M, $801.2M, and $937.9M, respectively) have been adjusted for non-routine general and administrative items amounting to ($25M), ($5M), and ($35M), respectively, which are actual costs related to leadership
conferences and donations made to the Starbucks Foundation. FY15 growth guidance excludes future costs related to leadership conferences and donations made to the Starbucks Foundation, as well as incremental revenues, future transaction and
integration costs, and support costs related to the acquisition of Starbucks Japan.
Increased working capital efficiencies
INVENTORY+ RECEIVABLES – PAYABLES & OTHER ACCRUEDS
$ MILLIONS
CORE NET WORKING ON HAND GREEN
CAPITAL DECREASED COFFEE DROPS
$1,000 ~$250M OVER 40 %
$743
FY12 FY14
CASH CONVERSION CYCLE ~$500M CASH CONVERSION
CYCLE SHORTENED BY
DAYS ADJUSTED FOR
RATE/VOLUME 30 DAYS
~50
~20
FY12 FY14
Operating cash flow more than 2X over past 4 years*
OPERATING CASH FLOW*
$ MILLIONS
28%
CAGR
$2,908 $3,372
$1,612 $1,750
FY11 FY12 FY13 FY14
*FY14 operating cash flows is a non-GAAP measure. Operating cash flows growth rate is based on non-GAAP operating cash flows: FY14 GAAP operating cash flows of $608 million have been adjusted to exclude the
$2.8 billion cash payment in FY14 related to the Kraft arbitration matter.
Best in class return on invested capital*
26.9%
24.2%
22.4%
21.5%
FY11 FY12 FY13 FY14
* ROIC defined as NOPAT/Invested Capital. NOPAT adjusted for implied lease interest expense; average invested capital includes present value of minimum lease obligations and excludes cash, cash equivalents and short-term investments
Best in class capital deployment
HIGH
S&P 500
EX-FINANCIALS 1
35% 192% 333%
MEDIAN TOTAL SHAREHOLDER (n=27) (n=25) (n=12)
RETURN RELATIVE TO S&P 500 2
2003A – 2013A
CHANGE IN ROIC 3
191%
(n= 20)
(105%) to 19%
(n=78)
95%
(n= 29)
LOW
CHANGE IN INVESTED CAPITAL 4 HIGH
Source: Morgan Stanley: CapitalIQ
(1) As of 1/1/2003; Includes only those with beginning ROICs between 6%-20%; ~200 companies in total No representation or warranty, express or implied, is made by Morgan Stanley in
(2) TSR of S&P 500 = 163% relation to the accuracy or completeness of the information in this document and
(3) ROIC = NOPAT / Invested Capital Morgan Stanley accepts no liability, responsibility or obligation (whether in
(4) Invested Capital = Total Debt + Shareholders Equity contract, tort or otherwise) in relation to such information.
Substantial increase in cash returns
$ BILLIONS
$1.6 Dividend payout
over 4 years
$1.1 $1.2
$0.8
UP 100 %
$0.9 DIVIDENDS
Dividend
$0.5 $0.6 SHARE paid in FY15
$0.4 REPURCHASES
+23 %
$0.8
$0.5 $0.6 $0.5
FY11 FY12 FY13 FY14
Nominal coffee impact for FY15, 70% covered
ARABICA “C” PRICE/LB VERSUS SBUX P&L PRICE/LB YOY COFFEE PRICE IMPACT TO SBUX P&L
"C" Price
$2.82 TIME PERIOD
ARABICA “C” SBUX P&L YOY IMPACT
SBUX Price Apr. 2011 PRICE/LB* PRICE/LB* TO OI
FY12 $1.94 $2.69 -$206M
$1.90
Dec. 1. 2014
FY13 $1.36 $2.36 $97M
FY14 $1.58 $1.82 $110-120M**
$1.06
Nov. 2014
FY15 (PLAN) N/A ROUGHLY FLAT TO FY14
FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
* Green coffee
** Net coffee benefit of $0.09-$0.10 per share, which reflects gross coffee impact partially offset by pricing
changes in CPG as well as routine investments in the business
Continued long term high growth outlook
BUILDING ON 4 CONSECUTIVE YEARS OF 15%+ EPS GROWTH*
COMP REVENUE G&A LONG TERM
ROIC***
GROWTH GROWTH GROWTH** EPS GROWTH
HALF OF %
MID-SINGLE % REVENUE %
>25
DIGITS 10 + GROWTH 15-20 INCREASING
(in FY15) 50-100 BPS/YR
* Based on Non-GAAP EPS. A reconciliation of GAAP to Non-GAAP measures can be found at the end of this presentation.
** FY15 growth guidance excludes future costs related to leadership conferences and donations made to the Starbucks Foundation, as well as incremental revenues, future transaction and integration
costs, and support costs related to the acquisition of Starbucks Japan.
*** ROIC defined as NOPAT/Average Invested Capital. NOPAT adjusted for implied lease interest expense; average invested capital includes present value of minimum lease obligations and excludes
cash, cash equivalents and short- and long-term investments
Uniquely positioned to deliver
significant shareholder value
Clear strategic Innovation as
execution core competency
framework
Best in class Incremental global
operations growth opportunities
Strong financial Additional margin
discipline expansion
opportunities
NON-GAAP OPERATING INCOME NON-GAAP OPERATING MARGIN % NON-GAAP EARNINGS PER SHARE
RECONCILIATION (IN Ms) RECONCILIATION RECONCILIATION
FY11 FY12 FY13 FY14 FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14
GAAP operating income $ 1,728.5 GAAP operating margin 14.8% GAAP earnings per share $ 1.24
Restructuring Charges and
Sale of properties (30.2) Sale of properties (0.3)% (0.01)
impact of 53rd week
Non-GAAP operating income $ 1,698.3 Non-GAAP operating margin 14.5% Non-GAAP earnings per share $ 1.23
GAAP operating income $ 1,997.4 GAAP operating margin 15.0% GAAP earnings per share $ 1.62
Gains From Switzerland/Austria
GAAP operating income $ (325.4) GAAP operating margin (2.2)% (0.10)
acquisition/sale of properties
Litigation charge resulting Litigation charge resulting
2,784.1 18.7% Non-GAAP earnings per share $ 1.52
from Kraft arbitration from Kraft arbitration
Non-GAAP operating income $ 2,458.7 Non-GAAP operating margin 16.5% GAAP earnings per share $ 1.79
GAAP operating income $ 3,081.1 GAAP operating margin 18.7% GAAP earnings per share $ 0.01
Litigation credit related Litigation credit related Litigation charge resulting
(20.2) (0.1)% 2.25
to Kraft arbitration to Kraft arbitration from Kraft arbitration
Costs from transactions Costs from transactions Gain on sale of equity in
2.4 0.0% (0.03)
in Q4 2014(1) in Q4 2014(1) Mexico joint venture
Gain on sale of equity in Chile
Non-GAAP operating income $ 3,063.3 Non-GAAP operating margin 18.6% (0.03)
and Argentina joint ventures
(1) Includes
a portion of the transaction costs incurred in Q4 FY14 related to the acquisition of Starbucks (1) Includes
a portion of the transaction costs incurred in Q4 FY14 related to the acquisition of Starbucks Non-GAAP earnings per share $ 2.19
Japan and costs related to the sale of our Australia retail operations in Q4 FY14. The remaining Japan and costs related to the sale of our Australia retail operations in Q4 FY14. The remaining
majority of the impact from these transactions is included in net interest income and other. majority of the impact from these transactions is included in net interest income and other.
GAAP earnings per share $ 2.71
Litigation credit related
(0.02)
to Kraft arbitration
Net benefit from transactions
(0.03)
in Q4 2014(2)
Non-GAAP earnings per share $ 2.66
GAAP earnings per
30.6% 10.5% (99.4)% 27,000.0%
share growth rate
Non-GAAP earnings per
23.6% 17.8% 22.3% 21.5%
share growth rate
(2) Thenet benefit from transactions in Q4 2014 relates primarily to a $0.05 gain on the sale of our Malaysia
equity method investment, partially offset by a loss on the sale of our Australia retail operations and
transaction costs incurred in Q4 FY14 related to the acquisition of Starbucks Japan.
© 2014 STARBUCKS COFFEE COMPANY.
ALL RIGHTS RESERVED.
