Starbucks Financial Analysis

Starbucks is a strong challenger in the meshwork sector and a attractor in the foodie deep brown fabrication. With a keep growth rate in store openings and maintaining victorious sugar energy of its cognitive processs, Starbucks has demonstrated its ability to sustain a reliable and steady growth. Starbucks ability to contend with the pic to genuine financial threats such as economical recession, higher interest rates, and global competition, is constantly proven by its incomparable instigator image, its continual mathematical ingatheringion innovations, and its exceptional customer service. This also proves to be its strongest coronation strategy.One strategic way to measure the vulnerability of Starbucks to topical financial threats is to execute a SWOT Analysis. A SWOT summary is a situation analysis in which the strengths and weaknesses of an organization, and external opportunities and threats it faces atomic number 18 examined to chart a strategy (Busines s Dictionary, 2012).SWOT is the acronym for strengths, weaknesses, opportunities, and threats. The purpose of the SWOT analysis is to quantify what an organization can and cannot do in attachment to evaluating the potential opportunities and any financial and economical threats it may face.Over the years, Starbucks make water developed much successful strengths. here ar a few of the most perceptible strengths The quality of their burnt umber is considered the highest in the sphere. They engage with customers and the communities to ply better business.Starbucks has over 17,000 stores globally in genial locations to attract to a greater extent customers. Starbucks feed boom outed their product occupation to sandwiches, pastries, and natural tea-blend drinks. Starbucks watch loyal employees who ar valued, motivated, and hard-working and are provided a pleasant working environment.They waste exceptional relationships with all suppliers which helps them exceed as indust ry market leaders. Over the past several years, Starbucks has received several award and recognitions such as no. 1 Best Coffee and No. 1 virtually Popular Quick Refreshment kitchen stove by Zagats Survey of National range Restaurants, one of The Best 100 Companies to Work For by Fortune Magazine, one of the Worlds Most Ethical Compamies by Ethisphere, and one of the Worlds 50 most Innovative Companies by debauched Company. With all companies, where there are strengths there are weaknesses.Starbucks have remark and viable strengths, but they have weaknesses that could overshadow the success of these strengths placing them a step or two behind their competitors. Here are somewhat of their weaknesses The size of the high society is larger than most of their competitors, leave out of internal focus beca map much focus is on magnification and not on the diversification of opposite sectors, product pricing is overstated because of their premium brand coffee, which demands pre mium pricing, and excessive dependency on coffee-alone products.Starbucks have leave behinded many opportunities to become the most valuable gourmet coffee leader in the world. They have already succeeded in expanding their product line by introducing the world to cold coffee beverages, flavored herbal drinks, and hot sandwiches and salads for lunch.So, outright they have the opportunity to pass to expand in their development overseas, continue their innovation and commitment to product development, and possibly co-brand with other manufacturers of food and drinks to help expand their product line.The competition in gourmet coffee in general has proved to be more advanced than one would imagine. So, its no perplexity that the competition would be one the most highly doable threats. With coffee sellers ranging from coffee houses to restaurants and fast-food carry-outs such as McDonalds, Starbucks has to contend with ensuring that they maintain their perfection in coffee and custo mer service to avoid such threats. some other major threat is the economy. The state of the economy today, in particular in the future depends especially on consumer spending.This would scat a key role in Starbucks gross sales growth and profits. Factors such as accession debt service levels resulting from interest rate changes, downturn in the house market, and the increase in oil and gas prices would go optional spending.Now that the assessment of the SWOT analysis has been completed, its time to determine the financial performance of Starbucks over the past ternary years and predict how it will perform in the future by apply financial balance analysis. This will be stubborn by examining the Income Statement and Balance Sheet as of FY 2011.Consolidated Statements Of Earnings (USD $)12 Months EndedIn Millions, except Per Share data Oct. 02, 2011 Oct. 03, 2010 Sep. 27, 2009 meshwork revenues Company-operated stores $ 9,632.4 $ 8,963.5 $ 8,180.1 Licensed stores 1,007.5087 5.2795 CPG, foodservice and other 1,060.50868.7799.5 Total discharge revenues 11,700.4010,707.409,774.60 live of sales including occupancy costs 4,949.304,458.604,324.90 Store in operation(p) expenses 3,665.103,551.403,425.10 Other operating(a) expenses 402293.2264.4 Depreciation and amortization expenses 523.3510.4534.7 normal and administrative expenses 636.1569.5453 Restructuring charges 053332.4 Total operating expenses 10,175.809,436.109,334.50 Gain on sale of properties 30.200 Income from equity investees 173.7148.1121.9 Operating income 1,728.501,419.40562 Interest income and other, net 115.950.337 Interest expense 33.3-32.7-39.1 Earnings before income taxes 1,811.101,437559.9 Income taxes 563.1488.7168.4 exculpate earnings including noncontrolling interests 1,248948.3391.5 cyberspace earnings (loss) attributable to noncontrolling interests 2.32.70.7 Net earnings attributable to Starbucks $ 1,245.7 $ 945.6 $ 390.8 Earnings per share introductory $ 1.66 $ 1.27 $ 0.53 E arnings per share diluted $ 1.62 $ 1.24 $ 0.52 Weighted middling shares outstanding Basic 748.3744.4738.7 Diluted 769.7764.2745.9 Cash dividends state per share $ 0.56 $ 0.36 $ 0In reviewing the Income Statement for Starbucks from 2009 to 2011, it is evident that the alliance has successfully increased its profitability through performance each year by almost 10%. Its income from operation has almost tripled from 2009. Based on Starbucks continued picture of expansion, this financial progression depicts a continuous trend.As noted in the financial statement above and picture in the chart infra, Starbucks obtains the majority of its revenue from its company-operated stores. This proves that if Starbucks continues its expansion of retail stores, the revenue from these sales will continue to rise as it has in the past 10 years. The companys share earnings have also spiked in the last three years by almost doubling amidst 2009 and 2010 and up 31% in 2011.The financial ratio anal ysis will provide an assessment of the stability and profitability of Starbucks and allow investors and shareholders to determine the probability of a profitable future. Below is a chart of antithetical financial ratios used to describe the different criteria for Starbucks and to evaluate the past three years. Profitability Revenue201120102009Gross Profit 57.7% 58.4% 55.8% EBIT proportionality 15.5% 13.4% 5.7%The first set of ratios measures the profitability of Starbucks. These ratios measure the military strength of Starbucks capital. A high profitability could be attributed to in effect(p) competency. This chart shows that Starbucks have maintained an elevated profit margin, which indicates its ability to manage its largest assets costs.The other ratio, EBIT measures the overall operating efficiency. The next chart shows the liquidity ratios of the firm which indicates how cost-efficient Starbucks handles its short-term obligations. Short-term liquidity includes items that are to be received or paid in cash within a year.A ratio of 2 is the perfect rate for a good standing company using the current ratio. This indicates that the company can remuneration its creditors and that it has more current assets than current liabilities. A current ratio below 1 signifies trouble for the company and that they may have problems meeting their creditor obligations. The difference amidst the current ratio and quick ratio is the use of inventory.Financial Condition 2011-2010Debt/ law Ratio 20% 25% Current Ratio 1.831.55 Quick Ratio 0.190.17The below chart illustrates what kind of return Starbucks receives on its investments. These ratios deliver investors a clear mind of how well the investments are performing. The ROE ratio illustrates the returns that stockholders are earning on their investments in Starbucks. In prior years, Starbucks have consistently increased this ratio percentage and continues to rise. The ROA ratio tells investors how much profit Starbuc ks generated for every dollar in assets.Investment Returns % 2011-2010Return on Equity 28.4% 25.7% Return on Assets 18.1% 13.8%Based on the ratios above, it appears that Starbucks is go on to progress successfully in profits and its ability to increase leverage and maintain a moderately stable trend in the future. Starbucks can increase leverage by repurchasing outstanding stock and change magnitude debt financing. Based on the recent benchmarks over a 12 month period, Starbucks is still in line with the industry.