Starbuck Corporation 1 Starbucks Corporation
Karli Brakes
ACCT 202
Jill Snyder
Starbuck Corporation 2 Table of Contents
Company Overview and Introduction…………………………………...…………..Page 3
Balance Sheet…………………………………………………………………..……Page 4
Common Size Balance Sheet………………………………………………………..Page 5
Balance Sheet Analysis…………………………………………..………………….Page 6
Income Statement……………………………………………………………………Page 7
Common Size Income Statement………………………………….………………...Page 8
Income Statement Analysis………………………………………………………….Page 9
Statement of Cash Flows………...………………………………………...........….Page 10
Statement of Cash Flows Analysis…………………………...……...……………..Page 11
Ratios……………………………………….………………………………………Page 12
Notes to Financial Statements…………….………………………………………..Page 18
Auditors Report……………………………….……………………………………Page 21
Management’s Analysis……………………………………………………………Page 22
Historical Analysis…………………………………………………………………Page 24
Current Event………………………………………………………………………Page 25
Conclusion………………………………………………………………………….Page 26
References………………………………………………………………………………………………..Page 27 Starbuck Corporation 3 Company Overview and Introduction
Starbucks Corporation is an American global coffee company and chain.
Starbucks locations serve hot and cold beverages, whole-bean coffee, micro ground
instant coffee, full-leaf teas, pastries, and snacks. Most stores also sell a combination of
packaged food items, hot and cold sandwiches, and items such as mugs and even espresso
machine. Starbucks first opened in 1971 as a single store in Seattle Washington’s famous
Pike Place Market. The book Moby Dick inspired the name for this little coffee store; it
evoked the romance of the high seas and the seafaring tradition of the early coffee
traders.
A year later in 1981, a man named Howard Schultz had first walked into the
Starbucks store. From his first cup of Sumatra, Howard was drawn into Starbucks and
joined a year later, 1982. The year of 1983, Howard traveled to Italy. During this trip he
was instantly fascinated with the Italian coffee bars’ vibe. He loved the romance of the
Italian coffee experience. He had a vision to bring the Italian coffeehouse back to the
United States. Howard envisioned a place between work and home. He left Starbucks for
a short period of time to start his own coffeehouse and returned in August 1987 to
purchase Starbucks with the help of local investors. The company started to grow at a
rapid rate. In the 1990s, Starbucks was opening a new store every workday, a pace that
continued into the 2000s.
Today from 2012-2013, with more than 17,000 stores in 55 countries, Starbucks
is the premier roaster and retailer of specialty coffee in the world.
Starbuck Corporation 4 Balance Sheet
Annual Data; All numbers in Thousands
Period Ending
Assets
Current Asset:
Cash And Cash Equivalents
Short Term Investments
Net Receivables
Inventory
Other Current Assets
Total Current Assets
29-Sep-12
1-Oct-11
2-Oct-10
1,188,600
848,400
724,600
1,241,500
196,500
4,199,600
1,148,100
902,600
616,900
965,800
161,500
3,794,900
1,164,000
285,700
606,900
543,300
156,500
2,756,400
Long Term Investments
Property Plant and Equipment
Goodwill
Other Assets
Intangible Assets
Total Assets
575,900
2,658,900
399,100
385,700
479,300
2,355,000
321,600
409,600
8,219,200
7,360,400
533,300
2,416,500
262,400
346,500
70,800
6,385,900
1,699,600
1,626,500
1,365,000
510,200
2,209,800
449,300
2,075,800
414,100
1,779,100
Long Term Debt
Other Liabilities
Minority Interest
Total Liabilities
549,600
345,300
5,500
3,110,200
549,500
347,800
2,400
2,975,500
549,400
375,100
7,600
2,711,200
Stockholders' Equity
Common Stock
Retained Earnings
Capital Surplus
Other Stockholder Equity
Total Stockholder Equity
Total Liabilities & Stockholder Equity
700
5,046,200
39,400
22,700
5,109,000
8,219,200
700
4,297,400
40,500
46,300
4,384,900
7,360,400
700
3,471,200
145,600
57,200
3,674,700
6,385,900
Liabilities
Current Liabilities:
Accounts Payable
Short/Current Long Term Debt
Other Current Liabilities
Total Current Liabilities
Source: Yahoo Finance Starbuck Corporation 5 Common Size Balance Sheet
Annual Data; All numbers in Thousands
29-­Sep-­
12 Period Ending $
Assets Cash And Cash Equivalents Short Term Investments Net Receivables Inventory Other Current Assets Long Term Investments Property Plant and Equipment Goodwill Other Assets Intangible Assets Total Assets Liabilities Total Liabilities Stockholders' Equity Total Stockholder Equity Total Liab. & Stockholder's Eq. Source: Yahoo Finance 1-­Oct-­11 %
$
2-­Oct-­10 %
$
%
1,188,600 14% 1,148,100 16% 1,164,000 848,400 10% 902,600 12% 285,700 724,600 9% 616,900 8% 606,900 1,241,500 15% 965,800 13% 543,300 196,500 2% 161,500 2% 156,500 575,900 7% 479,300 7% 533,300 2,658,900 399,100 385,700 32% 5% 5% 0%
2,355,000 321,600 409,600 32% 2,416,500 4% 262,400 6% 346,500 0%
70,800
18%
4%
10%
9%
2%
8%
38%
4%
5%
1%
8,219,200 100% 7,360,400 100% 6,385,900 100%
3,110,200 38% 2,975,500 40% 2,711,200 42%
5,109,000 62% 4,384,900 60% 3,674,700 58% 8,219,200 100% 7,360,400 100% 6,385,900 100%
Starbuck Corporation 6 Balance Sheet Analysis
Balance sheets can be an extremely resourceful for companies and potential investors. The balance sheet shows a snapshot of the company’s financial standings and health. These documents are sometimes referred to as the Statements of Financial Position. It shows how much cash the company has on hand, stockholder’s financial positions, where the company stands financially, as well as what they carry in debt and own. Formatting on the balance sheet is simple. It is split up into three main sections: Assets, Liabilities, and Shareholder’s Equity. Starbucks Corp. has handled its’ cash well. With only a slight increase in Cash and Cash Equivalents all three years shown. This is a favorable trend because it shows
that they are generating and maintaining their cash, they may be investing it and
expanding their company. Their long-term investments have increased from years 20112012.
On the Liabilities side it shows that Starbucks has increased their Accounts
Payable every year. This is not a favorable trend. This means that every year they are
increasing money owed, and may not be paying it off. But the positive trend in the
Liabilities section is that long-term debt is stable and not increasing.
The last section in the balance sheet is the Shareholder’s Equity section, which is
currently showing favorable trends for Starbucks. Retained Earnings in this section of the
balance sheet are increasing, which is favorable trend for the company because it shows
that investors and prices per share are increasing.
Starbuck Corporation 7 Income Statement
Annual Data; All numbers in Thousands
Period Ending
29-Sep-12
1-Oct-11
2-Oct-10
Total Revenue
13,299,500
11,700,400
10,707,400
Cost of Revenue
5,813,300
4,915,500
4,416,500
Gross Profit
7,486,200
6,784,900
6,290,900
5,149,200
4,737,000
4,456,200
Operating Expenses:
Selling General and Administrative
Non Recurring
Others
53,000
550,300
523,300
510,400
Total Operating Expenses
5,699,500
5,260,300
5,019,600
Operating Income
1,786,700
1,524,600
1,271,300
2,091,800
1,844,400
1,469,700
-32,700
-33,300
-32,700
2,059,100
1,811,100
1,437,000
-674,400
-563,100
-488,700
-900
1,383,800
-2,300
1,245,700
-2,700
945,600
Income from Continuing Operations:
Income Before Interest And Taxes
Interest Expense
Income Before Tax
Income Tax Expense
Minority Interest
Net Income
Source: Yahoo Finance Starbuck Corporation 8 Common Size Income Statement
Annual Data; All numbers in Thousands
Period Ending
29-Sep-12
$
Total Revenue
1-Oct-11
%
13,299,500 100%
$
2-Oct-10
%
11,700,400 100%
$
%
10,707,400 100%
Cost of Revenue
5,813,300
44%
4,915,500
42%
4,416,500
41%
Gross Profit
7,486,200
56%
6,784,900
53%
6,290,900
59%
Source: Yahoo Finance Starbuck Corporation 9 Income Statement Analysis
Annual Data; All numbers in Thousands
An Income Statement measures a company's financial performance over a
specific accounting period; in this case we compared three of the most recent years.
Financial performance is assessed by giving a summary of how the business acquires its’
revenues and expenses.
The most positive thing observed from the Income Statement is that the company is operating at a gain for all three years presented. The income and Earnings per Share (EPS) are positive and this reflects a positive trend for all years. Operating Expenses are increasing each year and this can be due to the company making more and newer products than previous years. This can be viewed as favorable or unfavorable if the company is just becoming less efficient. Net income is increasing significantly and the company seems to be very stable and in a favorable upward success. Starbuck Corporation 10 Statement of Cash Flows
29-Sep12
1-Oct-11
2-Oct-10
1,383,800
1,245,700
945,600
Depreciation
580,600
550,000
540,800
Adjustments To Net Income
189,000
166,400
106,800
Changes In Accounts Receivables
-90,300
-88,700
-33,400
Changes In Liabilities
-20,700
181,500
1,900
-273,300
-422,300
123,200
-19,700
-22,500
17,300
1,750,300
1,612,400
1,704,900
-856,200
-531,900
-445,800
47,800
-536,000
-339,100
-165,600
48,400
-4,600
-974,000
-1,019,500
-789,500
Dividends Paid
-513,000
-389,500
-171,000
Sale Purchase of Stock
-198,600
Period Ending
Net Income
Operating Activities, Cash Flows Provided By
or Used In
Changes In Inventories
Changes In Other Operating Activities
Total Cash Flow From Operating Activities
Investing Activities, Cash Flows Provided By
or Used In
Capital Expenditures
Investments
Other Cash flows from Investing Activities
Total Cash Flows From Investing Activities
Financing Activities, Cash Flows Provided By
or Used In
-312,500
-333,000
Net Borrowings
-30,800
30,800
Other Cash Flows from Financing Activities
-59,000
-20,200
-13,300
-745,500
-608,000
-346,000
9,700
-800
-5,200
40,500
-15,900
564,200
Total Cash Flows From Financing Activities
Effect Of Exchange Rate Changes
Change In Cash and Cash Equivalents
Source: Yahoo Finance Starbuck Corporation 11 Statement of Cash Flows Analysis
Operating activities
Starbuck’s net cash flows from operating activities significantly decreased from
2010 to 2011 but then increased from $1,612,400 million in 2011 to $1,750,300 million
in 2012. This may have been caused by the change in inventories compared from 2011 to
2012 and steady increase in depreciation from all three years.
Investing activities
Starbucks’ net cash flows from investing activities decreased from 2011 to 2012.
This decrease is due to the large decrease in capital expenditures and other cash flows
from investing activities. This is an unfavorable trend because Build-A-Bear isn’t
showing liquidity and is showing that they’re having difficulty managing cash and their
short-term investments which is also proven in the balance sheet. However, there is a
slight increase in other cash flows from investing activities that balances the decrease in
capital expenditures. This is favorable because it implies that Starbucks is expanding in
some other investments.
Financing activities
Starbucks net cash flows from financing activities has increased each of the three
years. This increase is mostly from paid dividends and other cash flows from financing
activities, which is favorable because it increases the value of the outstanding shares for
its stockholders. This shows a favorable trend because even though the total cash flow
from financing activities is in the negative, the trend still shows positive growth in the
company.
Starbuck Corporation 12 Ratios
Short Term Solvency of Liquidity Measures:
Ratio
2012
2011
2010
Current Ratio:
1.90
1.83
1.55
Industry
1.13
Definition: Measures the liquidity (debt) of a business. Current Assets/Current
Liabilities.
Analysis: This shows the company’s current ratio is increasing every year. This is
favorable because it shows the higher the current ratio, the less risky it would be to lend
money or invest into this company. On the other hand although high-current ratio can
indicate liquidity it can also indicate that a company is not efficiently using its cash and
other short-term assets, which would be unfavorable. It is a favorable trend when
compared to the industry, because some of its competitors are less able to pay off their
short-term obligations faster than Starbucks.
Ratio
2012
2011
Quick Ratio:
1.34
1.36
2010
1.24
Industry
0.99
Definition: Measures the liquidity (debt) of a business without including inventories.
Current Assets-Inventory/Currents Liabilities.
Analysis: The quick ratio is similar to the current ratio except it excludes Inventory .
Inventory is not as liquid as items like cash. The purpose of the quick ratio is to measure
whether or not a company could pay off its current liabilities if they were to come due
“today”. In addition to that, the higher the quick ratio shows the more profitability the
company has. Therefore, the slight decrease in the quick ratio from 2011 to 2012 shows
Starbuck Corporation 13 an unfavorable trend. However, since the ratio is still showing more profitability
compared to the industry, this is also considered a favorable trend.
Long-Term Solvency Measures:
Ratio
Total Debt Ratio:
2012
2011
2010
.38
.40
.43
Industry
Definition: Measures the debt of a company compared to its assets. Total Assets-Total
Equity/Total Assets.
Analysis: This ratio is used to measure a company’s ability to meet long-term
obligations. The total debt has decreased every year, which shows a very favorable trend.
When looking at inventories on the balance sheet, there’s a favorable trend because
inventories has increased every year. When combining all long-term assets, we find that
there’s a bigger increase in the ratio showing a favorable trend.
Ratio
2012
2011
2010 Industry
63.97
55.38
44.94
Times Interest Earned
Ratio:
64.06
Definition: Measures a borrower’s ability to pay back interest. EBIT/Interest
Analysis: There has been an increase every year. This shows a very favorable trend
because the ability to meet an interest payment is significantly increasing every year.
However, Starbuck’s ratio has been lower than the industry every year, which is
unfavorable because it shows that Starbuck’s could make their interest payment less than
the rest of the industry.
Starbuck Corporation 14 Asset Management Measures:
Ratio
2012
2011
2010
Industry
4.68
5.09
8.13
27.52
Inventory Turnover
Ratio:
Definition: Measure of efficiency of inventory management. Cost of Goods
Sold/Inventory
Analysis: Inventory turnover rates for Starbuck’s have slightly decreased every year. This
shows that sales were decreasing because Starbuck’s had to replenish inventory less
often. The lower the rate shows the longer that inventory had to sit. Along with this
information the rest of the Industry has a much higher turnover rate. This shows an
unfavorable trend.
Ratio
2012
2011
2010 Industry
77.99
71.71
44.90
Days’ Sales in Inventory
Ratio:
13.26
Definition: Number of days of use provided by the level of inventory. 365
days/Inventory Turnover
Analysis: Days in inventory increases every year, so this shows an unfavorable trend.
The increase in the ratio implies that inventory is sitting for a longer amount of time.
Also, Starbuck’s day’s sales in inventory ratio are significantly higher than the industry,
which implies that Starbucks has an unfavorable trend.
Starbuck Corporation 15 Ratio
2012
2011
2010 Industry
18.35
18.97
17.64
Receivables Turnover
Ratio:
17.39
Definition: How quickly a company collects its receivables. Sales/Accounts Receivable.
Analysis: This ratio increased from 2010 to 2011, which is unfavorable but is steadily
decreasing from 2011 to 2012, which is favorable. It shows that the time it takes for
Starbuck’s to collect its receivables is decreasing. Also, Starbuck’s receivables turnover
ratio is slightly higher than the industry, which implies that Starbucks collects its’
receivables a little less often than the industry, this is a somewhat unfavorable trend.
Ratio
2012
2011
2010 Industry
19.89
19.24
20.69
Days’ Sales in Receivables
Ratio:
20.99
Definition: Number of days it takes to collect credit. 356/Recievable Turnover.
Analysis: This ratio is slightly increasing from 2011 to 2012, which shows an
unfavorable trend. It’s unfavorable because the higher the number the longer it takes
Starbuck’s to collect a payment. Also, the ratio is also fairly favorable due to the fact that
it can collect a payment faster than the industry.
Ratio
2012
2011
2010
1.62
1.60
1.68
Industry
Asset Turnover
Ratio:
1.52
Definition: Number of days of use provided by the level of inventory. Sales/Total Assets.
Starbuck Corporation 16 Analysis: This ratio slightly increased from 2011 to 2012, which is an unfavorable trend.
The lower the ratio shows how the company is more effective the company is with its use
of its assets. This ratio is also unfavorable because Starbuck’s has a higher ratio than the
industry, which implies the industry has a higher profit margin.
Profitability Measures:
Ratio
2012
2011
2010
Industry
Gross Profit Margin
Ratio:
56.29% 57.99% 58.75%
53.86%
Definition: Measures the company’s prices versus the current mark-up margins. Gross
Profit/Total Revenue
Analysis: The average gross profit margin has decreased every year. This is favorable
because Starbuck’s is remaining fairly stable in an uneasy economy. The gross profit
margin also higher than the industry, which also shows a favorable trend.
Ratio
Profit Margin Ratio:
2012
2011
2010
Industry
10.40% 10.64%
8.83%
4.97%
Definition: Measures the profitability of a company by measuring the amount out of
every dollar that the company keeps. Net Income/Revenues
Analysis: From 2011 to 2012, there’s a little decrease in profit margin ratio. This is an
unfavorable trend because the higher the percentage, the more money this company is
making from every dollar. There was a large increase between the years 2010 and 2011,
Starbuck Corporation 17 this is very favorable. Also, when comparing to the industry, it has a lower profit margin,
which implies that the industry is making a much lower dollar compared to Starbucks.
Ratio
2012
2011
2010
Industry
Return on Assets
Ratio:
16.84% 16.92% 14.81%
7.53%
Definition: Measures a company’s performance against other companies in the industry.
Net Income/Total Assets
Analysis: This shows a decrease from 2011 to 2012. This is a little unfavorable because it
shows the amount of profit made by the assets. Compared to the industry this trend shows
Starbucks is managing their assets much better than the industry, so therefore is
favorable. Especially in the year 2011.
Ratio
2012
2011
2010
Industry
Return on Equity
Ratio:
27.09% 28.41% 14.81%
14.44%
Definition: Measures the amount out of every dollar that the company keeps from its
investments. Net Income/Total Equity
Analysis: This shows a huge increase between the years 2010-2011. This is favorable
because it shows that the investor earned a higher profit when compared to the previous
year. However there was a small decrease in 2012. The industry shows a way smaller
percentage on the return to equity ratio, which is favorable because it implies investors’
money, will earn less with competitors compared to Starbucks.
Starbuck Corporation 18 Notes to Financial Statements
1. Cash and Cash Equivalents
“We consider all highly liquid instruments with a maturity of three months or less at the
time of purchase to be cash equivalents. Cash and cash equivalents are valued using
active markets for identical assets. We maintain cash and cash equivalent balances with
financial institutions that exceed federally insured limits. We have not experienced any
losses related to these balances and we believe credit risk to be minimal. Our cash
management system provides for the funding of all major bank disbursement accounts on
a daily basis as checks are presented for payment. Under this system, outstanding checks
are in excess of the cash balances at 54 certain banks, which creates book overdrafts.
Book overdrafts are presented as a current liability in accounts payable on the
consolidated balance sheets.”
-
Cash and Cash Equivalents are extremely important for investors because it shows
liquidity. Cash and cash equivalents are generally considered to be a safe investment with
low risk and low returns.
2. Property, Plant and Equipment
“Property, plant and equipment are carried at cost less accumulated depreciation.
Depreciation of property, plant and equipment, which includes assets under capital leases,
is provided on the straight-line method over estimated useful lives, generally ranging
from 2 to 15 years for equipment and 30 to 40 years for buildings. Leasehold
improvements are amortized over the shorter of their estimated useful lives or the related
lease life, generally 10 years. For leases with renewal periods at our option, we generally
Starbuck Corporation 19 use the original lease term, excluding renewal option periods, to determine estimated
useful lives. If failure to exercise a renewal option imposes an economic penalty to us, we
may determine at the inception of the lease that renewal is reasonably assured and include
the renewal option period in the determination of the appropriate estimated useful lives.
The portion of depreciation expense related to production and distribution facilities is
included in cost of sales including occupancy costs on the consolidated statements of
earnings. The costs of repairs and maintenance are expensed when incurred, while
expenditures for refurbishments and improvements that significantly add to the
productive capacity or extend the useful life of an asset are capitalized. When assets are
retired or sold, the asset cost and related accumulated depreciation are eliminated with
any remaining gain or loss recognized in net earnings.”
-
The record of depreciation is significant to investors so that they may be aware of
true value of a company’s property, plant, and equipment values. These are long-term
assets that will benefit a company and an investor in the long run.
3.Marketing & Advertising
“Our annual marketing expenses include many components, one of which is advertising
costs. We expense most advertising costs as they are incurred, except for certain
production costs that are expensed the first time the advertising campaign takes place.
Annual marketing expenses totaled $277.9 million, $244.0 million, and $198.7 million in
fiscal 2012, 2011, and 2010, respectively. Included in these costs were advertising
expenses, which totaled $182.4 million, $141.4 million, and $176.2 million in fiscal
2012, 2011, and 2010, respectively.”
Starbuck Corporation 20 -
It is important for investors to know how much money a company is directing at
advertising. It shows how the company is expanding and trying to attract customers and
what all the company has to offer.
Starbuck Corporation 21 Auditor’s Report
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Starbucks Corporation Seattle, Washington
We have audited the accompanying consolidated balance sheets of Starbucks Corporation and
subsidiaries (the "Company") as of September 28, 2011, and September 29, 2012, and the
related consolidated statements of earnings, shareholders' equity and cash flows for the years
ended September 28, 2011, September 29, 2012. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the
financial position of the Company as of September 28, 2011, and September 29, 2012, and the
results of its operations and its cash flows for the years ended September 28, 2011, September
29, 2012, in conformity with accounting principles generally accepted in the United States of
America.
<SIGNATURE>
/s/ DELOITTE & TOUCHE
LLP
DELOITTE & TOUCHE LLP
Seattle, Washington
December 19, 2012
Source: Yahoo Finance The Independent Auditor’s Report is stating that all information from the
financial statements given by Starbucks Corp. is fair and unqualified. This report is
saying that Starbucks financial reports are fallowing the rules of GAAP and conform to
the standards. This is favorable to investors because it gives the company credit for being
reliable and fair.
Starbuck Corporation 22 Management’s Analysis
EPS for fiscal 2011 was $1.62, compared to EPS of $1.24 reported in fiscal 2010,
with the increase driven by the improved sales leverage and certain gains recorded in the
fourth quarter of fiscal 2011. We recognized a gain from a fair market value adjustment
resulting from the acquisition of the remaining ownership interest in our joint venture in
Switzerland and Austria as well as a gain on the sale of corporate real estate. These gains
contributed approximately $0.10 to EPS in fiscal 2011.
-
Earnings per share are always important for a current or potential investor. It’s
calculated by Net Income minus Dividends on Preferred Stock divided by Average
Outstanding Shares. Earnings per share serves as an indicator of a company's
profitability. It is generally considered to be the single most important variable in
determining a share's price.
Our international portfolio, which contributed 22% of total net revenues in
Fiscal 2011 continues to improve, with an operating margin of 13% for the year.
We continue to leverage the valuable lessons learned from the turnaround of our
US business, and continue to make progress on scaling the infrastructure of this
Segment. We are aggressively pursuing the profitable expansion opportunities
That exists outside the US, including disciplined growth and scale in our more
mature markets, and faster expansion in key emerging markets like China.
-
Starbucks is expanding, this is attractive to investors because it means the
Starbuck Corporation 23 company is branching out and starting new opportunities for profit. This could affect the
cash on hand for the company of Starbucks but it is favorable to have good cash
management.
Starbuck Corporation 24 Historical Analysis
Source: Yahoo Finance Starbucks (SBUX) during the past two years has fluctuated, but at an upward
incline pattern. Especially between September 2011 and May 2012 there was a dramatic
increase in stock value. That period is a very favorable to Investors. After that peak in
early 2012, there was a sudden fall in value later that year. Similar to the NASDAQ after
September of 2012, there seems to be a steady upward fluctuation. An over all
comparison to the NASDAQ economy, SBUX is doing extremely well. This shows that
the value of their company is very high and should attract investors.
Starbuck Corporation 25 Current Event
On October 15, 2012 there was an article about Starbucks new house hold
espresso machine called the Verismo™ System by Starbucks. This machine made its
debut on Verismo.com and at Specialty Retailers nationwide in September 2012. The
second I saw this machine on a commercial in December I was instantly interested. The
article goes on to tell you about the availability and distribution of this good. There were
demonstrations done by Starbuck barista’s at many locations, such as Williams-Sonoma
and Sur La Table to Macy’s and Bloomingdales.
“Tasting (and seeing) is believing,” says Cliff Burrows, Starbucks president of the
Americas. “We are coming out with a high-pressure single cup machine that we believe
is simpler than anything in the marketplace and delivers what consumers actually want—
a Starbucks-quality Caffè Latte they can easily make at home. Plus, customers can
quickly replenish Verismo pods because they are conveniently available wherever
Verismo™ machines are sold.”
“Response to the Verismo™ System has been terrific so far,” says Burrows, “and we are
looking forward to the Verismo™ being a popular gift this holiday season.”
I believe this was a good marketing idea by Starbucks. There are many different
brands out there that sell home espresso machines, but people really trust Starbucks with
their coffee. This item will also expand the type of service Starbucks offers to its
costumers. The current price for one of these models is $199. You also need to buy from
the selection of Verismo™ pods to flavor your espresso. I find this to be a reasonable
price when looking up home espresso machines.
Starbuck Corporation 26 Conclusion
From all the research and calculations I’ve done on Starbucks Corporation the
significant weaknesses of this company can be found in the Financial Statements and
Ratios. Although there is a significant increase in Inventory, and this may seem
favorable to the company, Days’ Sales in Inventory has increased dramatically over the
past three years. The increase in the ratio implies that inventory is sitting for a longer
amount of time. Also, Starbuck’s day’s sales in inventory ratio are significantly higher
than the industry, which implies that Starbucks has an unfavorable trend of unsold
products.
The most significant weakness is that all Profitability Measures show that 2011
was the most profitable year for Starbucks Corp. Even though 2012 shows an increase in
Net Income. Also located in the Balance sheet you can see that there was a huge increase
in Short Term Investments from years 2010-2011, and a decrease to 2012. This may be
an insight into the less profitable future of the company.
On the other hand, looking at the overview of the company’s standing in the stock
market and the total increase in profitability compared to the rest of the industry I would
have to say that Starbucks is a very successful and expanding business. The consistency
in the Cash and Cash Equivalents shows good cash management in all three current
years. I personally enjoy their coffee and they have a very loyal consumer base that they
will continue to increase.
Starbuck Corporation 27 References:
http://www.investopedia.com
http://www.reuters.com
http://insurancenewsnet.com
http://finance.yahoo.com/
http://www.starbucks.com/