Starbucks Corp.'s financial performance showed signs of improvement in its fourth quarter and full fiscal 2009 ending Sept. 27, and the company has raised its earnings guidance for fiscal 2010.
The company also announced positive news in the form of an agreement with Subway to feature Starbucks' Seattle's Best Coffee brand in nearly half of the sandwich chain's U.S. restaurants.
Starbucks' total revenue declined 4% -- to $2.4 billion -- in Q4, the result mostly of unfavorable currency effects and 385 store closings, according to the company. Comparable-store sales declined 1%, reflecting the same factors; however, this was an improvement over a 5% decline in last year's fourth quarter.
Operating margin improved to 8.2%, from 0.6% in the same period last year, and earnings per share rose to 20 cents versus 1 cent in last year's Q4.
For the full year, total revenue declined 6% to $9.8 billion, but operating margin rose 80 basis points to 5.7% (versus 4.9% in FY '08). EPS jumped 21%, to 52 cents (versus 43 cents in prior year).
Starbucks Chairman, President and CEO Howard Schultz attributed the improved financials to the company's efforts to improve customer and partner experiences, initiatives and innovations over the past 18 months, and "significant, permanent changes" to Starbucks' cost structure. "We are seeing broad-based improvement across our global business, and are cautiously optimistic about the upcoming holiday period," Schultz added, in announcing the results.
Citing improving top-line trends, as well as operational improvements at the corporate and store levels, the company increased its non-GAAP EPS guidance for FY 2010 to growth in the range of 15% to 20% over FY '09.
The company said that it's targeting revenue growth in the low- to mid-single digits for the year ahead, driven by modestly positive comparable-store sales, a 53rd fiscal week and about 300 net new store openings (primarily licensed, with 100 of these projected for the U.S. market).
Next year's corporate results should also benefit from the deal with Subway, which represents a foothold for Starbucks in the QSR sector to help counter McDonald's McCafe momentum and Dunkin' Donuts' aggressive coffee marketing.
The deal calls for Seattle's Best, which has been testing in some Subways since January, to be served in more than 9,000 of the sandwich chain's U.S. locations and more than 800 of its Canadian locations by the end of 2009. Expansion within the U.S. is planned for next year.
Prior to this deal, Seattle's Best's was sold in 6,000-plus cafes, restaurants, kiosks and food service locations in the U.S.
Subway will sell four Seattle's Best blends: Best Blend and its decaf version, Henry's Blend and the 6th Avenue Bistro Blend.