Image: Starbucks remains a strong free cash flow generator.
By Brian Nelson, CFA
On November 2, Starbucks (SBUX) reported strong fourth-quarter fiscal 2023 results that showed revenue advancing 11.4% and non-GAAP earnings per share coming in ahead of the consensus forecast. People aren’t balking at buying expensive coffee, and quite simply, people love their Starbucks brew, whatever it may be. The company’s fourth-quarter comparable store sales advanced 8% on a global basis (average ticket prices accounted for 4 percentage points of the increase), and Starbucks has a long runway for future store expansion, having opened 816 net stores in the quarter.
Here’s what CEO Laxman Narasimhan had to say about the quarter:
We finished our fourth quarter and full fiscal year strong, delivering on the higher end of our full-year guidance. Our Reinvention is moving ahead of schedule, fueling revenue growth, efficiency and margin expansion. Notably, we continue to see the positive impact of our Reinvention on our partner and customer experiences, proof points that we can continue to create, grow and strengthen our business while creating value for all. As we enter the current year, in the face of macro uncertainty, we remain confident in the momentum throughout our business and headroom globally. We expect sustained momentum throughout the company for years to come.
Operational efficiencies, sales leverage and pricing strength helped drive Starbucks’ GAAP operating income growth of 42.7% and non-GAAP earnings per share to $1.06 in the quarter, up 31% on a year-over-year basis. Starbucks ended its fourth quarter of fiscal 2023 with ~$3.95 billion in cash and short-term investments and short- and long-term debt of ~$15.4 billion, resulting in a net debt position on the books. Free cash flow generation remains robust at Starbucks, however, with the measure coming in at ~$3.7 billion for the fiscal year ending October 1, 2023. We’re reiterating the high end of our fair value estimate range of $120 for Starbucks’ shares.
Please select the image below to download its 16-page stock report.
