Starbucks, a global coffee giant

The story of Starbucks begins in 1971 in Seattle, U.S.A. Its first store, located in Pike Place Market, was sought out by customers for its fresh-roasted coffee beans, tea and spices sourced from countries across the globe. Its name was inspired by the popular Herman Melville novel Moby-Dick, seeking to evoke memories of seafaring coffee traders from a bygone time.

A decade later, a New Yorker by the name of Howard Schultz would visit the store and become enamoured with Starbucks coffee. Schultz went on to join the company in 1982. A year later, after visiting various coffeehouses in Italy, Schultz returned to Seattle, inspired to bring the rich Italian coffee culture to Starbucks. Starbucks was officially incorporated under the laws of the State of Washington, in Olympia, Washington, on 4 November 1985.

Over the course of the next few years, Starbucks expanded to Chicago, Vancouver (Canada), California, Washington, D.C. and New York. In June 1992, the company went public, at a price of $17 per share ($0.27 per share, adjusted for 6 subsequent stock splits). By the latter half of the 1990s, the company opened its first store in Japan, followed by Europe, and then China.

Starbucks today

Today, Starbucks welcomes millions of customers into its stores in thousands of neighbourhoods worldwide, dedicated to its mission “With every cup, with every conversation, with every community – we nurture the limitless possibilities of human connection.”

Headquartered in Seattle, Washington, the company ended the Q3 2024 period with 39,477 stores. Interestingly, stores in the U.S. and China comprise 61% of the company’s global portfolio, with 16,730 and 7,306 stores in the U.S. and China, respectively. Starbucks stock is traded on Nasdaq, under the trading symbol SBUX.

Starbucks reports Q3 Fiscal 2024 Results

On 30 July 2024, Starbucks reported its financial results for the 13-week fiscal 3  quarter ended 30 June 2024, revealing a mixed performance across its global operations.

Global comparable store sales declined by 3%, driven by a 5% decrease in transactions, partially offset by a 2% increase in average ticket size. In North America, comparable store sales fell by 2%, with a 6% drop in transactions mitigated by a 3% rise in the average ticket, while U.S. comparable store sales mirrored these trends. Internationally, sales declined by 7%, with China experiencing a significant 14% drop due to decreases in both average ticket size and transactions.

Despite these challenges, Starbucks opened 526 net new stores during the quarter, ending the period with 39,477 stores globally, with the U.S. and China accounting for 61% of the company’s portfolio. Consolidated net revenues declined by 1% to $9.1 billion, although they showed a 1% increase on a constant currency basis. The GAAP operating margin contracted by 60 basis points YoY to 16.7%, primarily due to increased promotional activity, investments in partner wages and benefits, and operational deleverage. Non-GAAP operating margin also saw a contraction of 70 basis points YoY, maintaining the same percentage as GAAP.

Earnings per share (EPS) for both GAAP and non-GAAP measures stood at $0.93, marking a decline of 6% and 7% year-over-year, respectively. The Starbucks Rewards loyalty program saw growth, with 90-day active members in the U.S. reaching 33.8 million, up 7% from the previous year.

In the North America segment, net revenues increased by 1% to $6.8 billion, driven by 5% growth in company-operated stores and expansion in the licensed store business, though this was partially offset by the 2% decline in comparable store sales. Operating income for this segment decreased to $1.4 billion, with an operating margin contraction to 21.0% from 21.7% in the prior year, primarily due to investments in wages, benefits, and promotional activities.

The International segment saw a 7% decline in net revenues to $1.8 billion, influenced by a 5% unfavourable impact from foreign currency translation and a 7% decline in comparable store sales. This was partially offset by an 11% growth in net new company-operated stores. Operating income for this segment dropped to $287.5 million, with the operating margin contracting to 15.6% from 19.0% in the previous year, largely due to increased promotional activities and investments, despite some operational efficiencies.

Sustainability and resource positivity

By 2030, Starbucks intends on halving its carbon, water and waste footprints. More specifically, according to company’s website, its sustainability goals include:

• “CARBON: 50% reduction in greenhouse gas emissions in Starbucks direct operations and value and supply chain.
• WATER: 50% of water withdrawal for global operations, packaging and agricultural supply chain will be conserved or replenished.
• WASTE: 50% reduction in waste sent to landfill from stores and manufacturing, driven by a broader shift toward a circular economy.”

In addition, Starbucks has also donated approximately 50 million coffee trees that are resistant to coffee rust diseases to farmers as part of its 2025 100 million tree commitment. The company also launched pilots in Guatemala, Mexico, Peru, Rwanda, and Kenya in 2019 to reduce water usage by up to 80% in coffee processing through investments in new mills.

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